The moratorium introduced under the Coronavirus Act 2020 imposed on forfeiting leases for non-payment of rent has finally been lifted. This means, that as long as the rent due is not now classified as “protected rent” by the Act, a landlord can now enforce its right to forfeit.
This five-point guide is intended to remind landlords of the basics if they seek to forfeit a lease for non-payment of rent only.
- Check your lease
Forfeiture is a remedy that is commonly reserved as a right of re-entry in the lease. Most leases will contain a right to forfeit but should still be checked to ensure to help identify exactly what steps you may need to take to effect forfeiture.
- Grace periods and waiving your right to forfeit
Forfeiture clauses will often say that the landlord has the right to re-enter if the rent remains unpaid for a certain number of days. This is called a grace period. This period begins with the day on which rent falls due and the right to forfeit occurs as soon as the grace period ends.
Landlords who intend to forfeit a lease need to make sure they do not waive their right to forfeit. What may constitute waiver of a right to forfeit is a complex matter but generally, a landlord who is aware of its right to forfeit and does some definite act that involves a continued existence of the tenancy waives its right to forfeit. Therefore, to avoid waiving this right, landlords should refrain from demanding or accepting rent or entering into any dialogue with their tenants, once the grace period has ended.
- Peaceable re-entry or court proceedings?
The landlord will need to consider whether to enforce forfeiture by either peaceable re-entry or court application.
Peaceable usually involves the landlord simply entering the property to take physical possession at a time when the tenant is unlikely to be present. This should always be done so with caution. If in doubt, it may be best to seek advice and engage experienced bailiffs to assist in the process. It is important to note that this option is not available to landlords where residential property is involved. Re-entry this way can usually be quicker and cheaper than court proceedings. Court proceedings are usually more appropriate if there is a potential for dispute over the sums owed or if peaceable re-entry is not possible.
- Relief from forfeiture
Once the landlord has re-entered the property, caution should still be exercised. The tenant, subtenant, or a mortgagee can apply to court for relief from forfeiture to reinstate the lease. The courts have wide discretion when offering relief and will usually grant it if the tenant has applied promptly and pays the arrears. Although there is no definitive deadline a tenant is generally expected to apply for this relief within six months.
- Additional burdens
Once a landlord has taken possession of the property they will need to deal with the tenant’s fixtures and chattels, utility bills, and perhaps take action to close existing Land Registry titles. If the tenant has left anything behind, the landlord should make a careful inventory and serve ‘torts notice’ on the tenant to discharge their duty to keep the items safe.
The Landlord must also carefully take into consideration the merits of forfeiting before proceeding. Forfeiting a lease will end all future liabilities under the lease, including any guarantors and former tenants. It will also possibly expose you to empty rates liability if the premises cannot be re-let swiftly.
If you are a landlord, thinking of enforcing your rights of forfeiture or you are a tenant and would like to seek advice on relief from forfeiture then call us today, on 0121 268 3208 or send us an email at email@example.com with your query and we will get back to you.