What do you do if you landlord has locked you out of your business premises? If your commercial lease has been forfeited?
The first thing is to seek legal help immediately. It is very stressful to arrive at your business premises and find that your landlord has changed the locks and put a notice of forfeiture on your door.
We can help you remedy the situation. Else Solicitors are experienced at helping companies to re-gain access to commercial premises, and restore their lease where possible.
Chris has a considerable amount of experience in this area and can take the required action to get you back into your premises and restore your lease, where this is possible.
This short article on commercial lease forfeiture covers:
- Key Takeaway Points
- Why Does Forfeiture of a Lease Occur?
- What Happens if my Commercial Lease is Forfeited?
- Case Study on Commercial Lease Forfeiture
- Why Else?
Key Takeaway Points
1. A commercial lease is broken because of non-payment of rent. Your commercial lease will specify the time you have after missing a payment for the landlord to decide whether he wants the lease to continue or be terminated by giving a notice of forfeiture.
2. The usual reason for non-payment of rent is cash flow problems. In this case, it is strongly advised that you contact your landlord to see if you can come to some mutually agreeable solution before he decides to terminate your lease.
3. Some tenants feel they have a grievance and mistakenly believe that the best way to get the landlord to the discussion table is to withhold their rent. This is highly inadvisable as it is likely to lead to forfeiture.
4. Your landlord may have waived the right to forfeit your lease by acting in a way which recognises the continuance of the lease after the breach. Examples are given below, but this is a complex area and an experienced solicitor will be able to advise you.
5. If your lease is forfeited, you must, within 6 months, make an application to Court for relief from forfeiture. You cannot just make a new arrangement with your landlord.
Why Does Forfeiture of a Lease Occur?
A commercial lease will have a number of terms which could be broken by the tenant. These terms are quite standard and are covered in your lease.
If you breach the lease in any way other than non-payment of rent, then, if the landlord wants to forfeit the lease, the landlord must first serve you with a notice that has to:
- Specify the breach;
- If the breach can be remedied, require you to remedy it. If it cannot be remedied the landlord should wait a short time (e.g. 14 days) before proceeding to forfeit your lease;
- Give you a reasonable period of time in which to remedy the breach;
- Require you to pay compensation in money for the breach, if needed
Only if the breach has not been remedied within the specified time can your landlord proceed to forfeit the lease.
The most common way a commercial lease is broken is by non-payment of rent. All standard commercial leases will cover what happens if you don’t pay your rent on time. They will also enforce the right of the landlord to re-enter the premises should they decide to terminate your lease by forfeiting.
The main difference in commercial leases is the length of time between you missing a rent payment and the landlord being able to decide if he should allow the lease to continue or serve a notice of forfeiture. In some cases, this can be as little as 24 hours or it could be as much as 14 or 21 days. It is important that you know which it is as well as when your rent is due.
The two main reasons that commercial rent goes unpaid, as mentioned in the key points, are cash flow problems and tenants withholding rent. There is a third reason that landlords can use to forfeit a lease and that is if the tenant enters into some form of insolvency procedure such as Administration, Company Voluntary Arrangement (CVA) or Liquidation.
A CVA is a form of insolvency which allows a company to reach a voluntary arrangement with its business creditors regarding payment of all, or part, of its business debts over an agreed period of time. If you are considering entering into a CVA, and want to continue trading (as most companies do), then you need to be aware of the fact that you may forfeit your lease. If your business is in financial difficulty, then we highly recommend that you speak to our insolvency and business recovery team on 01283 526200 who will take you through all your options so you can make the best decision for your business.
It is important to note that your landlord may lose (waive) their right to forfeit if they do any act which recognises the continuation of the tenancy after becoming aware of the breach. Such acts include:
- Demanding or accepting rent or other sums. Acceptance of rent by a landlord’s agent will amount to a waiver, even if the agent has been instructed not to accept it.
- Giving notice of intention to enter the premises to carry out repairs whilst you remain in occupation and in arrears.
- Instructing bailiffs.
- Granting any type of licence under the terms of the lease.
This is a complex area and we strongly recommend that you talk to Chris Else on 01283 526200 or at Chris.Else@elselaw.co.uk at your earliest opportunity as it may be that your landlord does not have a right to forfeit.
What Happens if Forfeiture of Lease Occurs?
If your lease is legally forfeited, then your landlord has the right to re-enter your premises and change the locks.
Sometimes landlords want to increase their rents and are actively looking for a reason to give notice of forfeiture. In most cases though, they just want their back rents and see forfeiture as a final step to getting these paid.
If the landlord does undertake forfeiture, you will need to engage an experienced solicitor. You cannot simply make a new arrangement with the Landlord and retain the protection afforded under your lease. If you wish to remain in occupation after forfeiture it is imperative that you make an Application to Court for relief from forfeiture and obtain a Court Order.
Your solicitor will contact your landlord’s solicitor on your behalf. They will make an offer that:
- You will pay the rent owed in full
- You will pay your landlord’s legal costs
- Your solicitor will do the required paperwork to apply for relief from forfeiture
If this is acceptable to your landlord, then your solicitor will make an application to the Court for relief from forfeiture. You will need to show to the Court that you are in a financial position to pay the back rents in full and cover your landlord’s legal costs.
The Court is not obliged to grant relief from forfeiture. The Court is unlikely to grant your application if you have had to apply for relief a number of times in the past or if you delay your application without good reason.
Once the Court order is obtained and the money has been received by your landlord your lease will be restored. It is important at this point that you review your new lease as your landlord may have chosen to reduce his exposure to non-payment of rent by requiring it to be paid monthly rather than quarterly.
Case Study: Commercial Lease Forfeiture
One of Else’s recent clients ran hotel. The tenant had a falling out with the landlord, as often happens with bars, restaurants and hotels. The tenant mistakenly thought that he could bring the landlord to the discussion table by not paying the rent.
The landlord forfeited his lease with all of our client’s food and drink stocks, as well as guests, in the hotel. The landlord continued the hotel’s trading so the guests remained relatively unaffected. However, it was urgent that this situation was remedied as quickly as possible for the preservation of the business hotel bookings.
We made an urgent application for relief from forfeiture, which we got and the tenant agreed to pay all the back rent and all of the landlord’s costs. We then went with our client to the negotiation table to sort out the underlying difficulty between him and the landlord.
This short case study highlights the dangers of withholding when you’ve got a problem with the landlord. If you have a disagreement with your landlord, then you should seek to remedy it by discussion and negotiation. If you feel that you are not being heard or you can’t seem to move things forward, then we invite you to contact us and we will help you to sort out the problem.
How we can help
Else Solicitors is very experienced in helping companies to regain access to their business premises and have their lease restored after it has been forfeited.
You will discover that we are different from other legal firms. We will help you sort out your lease, and also look at other ways to add value to your business. We could introduce you to new customers or suppliers in our extensive network, or offer you some valuable new insight into your market or potential new markets, or your area of business.
If you or your business needs some help or advice around forfeiture of a lease, we invite you to contact Chris Else, Head of Dispute Resolution at Else Solicitors on 01283 526200 or Chris.Else@elselaw.co.uk.