Forfeiture allows landlords to end a commercial lease when a tenant breaches their agreement, usually due to unpaid rent. However, strict legal steps must be followed, and mistakes can be costly. In this guide, we explain the complete process and why legal advice is often recommended before taking action.
What is the forfeiture of a commercial lease?
Forfeiture is when a landlord takes back possession of a property without the tenant’s agreement - usually because the tenant has breached the lease. This could be for reasons like unpaid rent or breaking other lease conditions. A landlord typically enforces forfeiture by hiring a Bailiff (Certificated Enforcement Agent), who peacefully enters the property and takes back possession.
Forfeiture is a contractual right included in most leases and is protected under Section 24(2) of the Landlord and Tenant Act 1954. However, tenants may also have the right to challenge it, so it’s important for landlords to follow the correct legal steps.
When can a landlord forfeit a commercial lease?
Commercial landlords can forfeit a lease if a tenant breaches their agreement - most commonly for non-payment of rent, but also for unauthorised subletting, property damage, or illegal activity.
To forfeit a lease, the lease must include a forfeiture clause (also called a ‘proviso for re-entry’). For rent arrears, landlords can usually take action immediately, but for other breaches, they must follow legal steps, including serving a Section 146 Notice under the Law of Property Act 1925.
A valid Section 146 Notice must:
Clearly state the breach.
Give the tenant a chance to fix it (if possible).
Allow a reasonable time for remedy or compensation.
If the tenant fails to resolve the issue, the landlord can either peaceably re-enter the property or apply to the court for forfeiture. Following the correct legal process is crucial to avoid disputes or unlawful eviction claims.
1. Peaceable re-entry
Peaceable re-entry is the fastest way for a landlord to take back possession of a commercial property, but it must be done carefully.
How it works: A Certificated Enforcement Agent (Bailiff) enters the property when it is unoccupied and takes possession by changing the locks.
When it can be used: Peaceable re-entry is usually only available for non-payment of rent, unless the lease specifically allows it for other breaches.
Risks: If a landlord carries out re-entry incorrectly - such as by using force or attempting it when the tenant is inside - it can be considered illegal eviction, which could lead to legal action.
Forfeiture by peaceable re-entry is not an option for residential properties, only commercial leases. If the tenant has breached terms other than rent arrears, landlords usually need to follow the court process instead.
2. Court proceedings
If peaceable re-entry is not an option, or if the landlord wants a legally binding decision, they can apply for forfeiture through the courts.
How it works: The landlord must serve a Section 146 Notice under the Law of Property Act 1925. This notice must:
Clearly state the tenant’s breach.
Give a reasonable time for the tenant to fix the issue (except in rent arrears cases).
Warn that the landlord may take legal action if the breach is
not resolved
Court application:
If the tenant does not remedy the breach within the given time, the landlord can
Can you terminate a lease without a forfeiture clause?
No, a landlord can only terminate a tenancy through forfeiture if there's an explicit right outlined in the lease. This right is typically detailed in a forfeiture clause, which lets the landlord end the tenancy if the tenant breaches certain lease terms.
What is relief from forfeiture of a commercial property?
Forfeiture is a serious step, and the law provides safeguards to prevent landlords from using it unfairly. If a landlord forfeits a lease due to a tenant’s breach, the tenant can apply to the court for relief to have the lease reinstated.
Courts generally favour granting relief from forfeiture if the tenant acts quickly, clears any arrears, fixes the breach, and covers the landlord’s costs. However, tenants must apply within six months of forfeiture. If they apply later, the court will only consider it if they have a strong reason for the delay.
How to serve notice of forfeiture for a commercial lease
To initiate the forfeiture process for a commercial lease, the landlord must follow the statutory guidelines. This involves serving a Section 146 notice to the tenant, notifying them of a breach of the lease terms, and requesting remedy if possible. Once the notice has been served and the tenant has been given reasonable time to rectify the breach without success, the landlord gains the right to proceed with the forfeiture of the lease.
If in doubt, always consult a commercial eviction solicitor for legal advice.
Possible alternatives to forfeiting a commercial lease
Forfeiting a lease is a serious step that can be costly and time-consuming. If a landlord prefers to avoid forfeiture - especially in cases of non-payment of rent - there are other options to recover arrears or address breaches. Here are some key alternatives:
1. Negotiating with the tenant
Open communication can often lead to a mutual agreement that benefits both parties. This might involve:
A repayment plan for overdue rent.
A temporary rent reduction or deferral.
Agreeing on new lease terms to help the tenant remain in business.
2. Using security measures
If the lease includes security provisions, the landlord may recover rent through:
Rent deposits – Using funds held as security for non-payment.
Personal or company guarantees – Holding guarantors accountable for the unpaid amount.
3. Taking legal action to recover rent
Landlords can pursue unpaid rent through county court proceedings, which may lead to:
A County Court Judgment (CCJ) against the tenant,
affecting
their credit rating.
Enforcement actions, such as seizing assets or obtaining an attachment of earnings order.
4. Issuing a statutory demand
A statutory demand is a formal legal notice requiring the tenant to pay their debt within 21 days. If they fail to do so, the landlord may proceed with:
A winding-up petition for companies.
A bankruptcy petition for individual tenants.
This option is best suited for cases where the tenant has the financial means to pay but is refusing to do so.
5. Using Commercial Rent Arrears Recovery (CRAR)
CRAR allows landlords to seize goods from a commercial tenant’s premises to recover unpaid rent. However, this process:
Only applies to pure rent arrears (not service charges or other costs).
Requires at least seven days’ notice before enforcement.
Must
be carried out by a certified enforcement agent.
6. Seeking damages for other breaches
If the tenant has breached the lease in other ways - such as unauthorised alterations or subletting without permission - the landlord can:
File a claim in the county court to seek financial compensation.
Apply for an injunction to stop ongoing breaches.
Each alternative should be carefully considered based on the specific lease terms and circumstances. Seeking legal advice can help landlords find the best solution while protecting their rights.
What is a waiver of forfeiture in a commercial lease?
A waiver of forfeiture happens when a landlord unintentionally gives up their right to terminate a lease. This happens if the landlord takes actions that acknowledge a breach of the lease without taking any steps to address it.
Typically, forfeiture clauses include a grace period during which rent cannot be paid. Once this period expires, the landlord gains the right to terminate the lease. However, the landlord can waive this right by demanding or accepting rent during the grace period.
Additionally, having discussions with the tenant after the grace period has ended can also unintentionally waive the right to forfeiture.
Get expert advice from Lawhive
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