Wrongful / unlawful forfeiture

Unlawful forfeiture, or wrongful forfeiture, can occur when a landlord attempts to terminate a commercial lease without following the correct legal procedures or when there is no valid ground for forfeiture.

This can lead to significant consequences for both landlords and tenants, including potential legal disputes, claims for damages, and disruption to business operations. Understanding what constitutes unlawful forfeiture and how to address it is crucial for both parties involved.

What is unlawful forfeiture?

Unlawful forfeiture happens when a landlord terminates a tenant’s lease without adhering to the legal requirements set out in the lease agreement or relevant laws. Forfeiture rights must be clearly stipulated in the lease, and the landlord must follow specific procedures, such as serving proper notice, before repossessing the property. Failure to do so can result in the forfeiture being deemed unlawful.

Common causes of unlawful forfeiture

Failure to serve proper notice

For breaches other than non-payment of rent, landlords must serve a Section 146 notice under the Law of Property Act 1925. This notice should specify the breach, allow time for it to be remedied, and demand compensation if applicable. If this notice is not served, any forfeiture action could be unlawful.

Waiver of the right to forfeit

If a landlord accepts rent or otherwise acknowledges the continuation of the lease after becoming aware of the tenant’s breach, they may have waived their right to forfeit. Attempting to forfeit the lease after such actions could be considered unlawful.

Re-entry without court order

In some cases, typically when the breach involves something other than non-payment of rent, the landlord must obtain a court order to re-enter the property. Failure to do so can result in the forfeiture being illegal.

What are the grounds for relief from forfeiture?

Relief from forfeiture can be granted by a court after a tenant rectifies the breach that led to forfeiture, for example by paying outstanding rent or remedying other covenant breaches. The tenant must act promptly by making an application to the court, and may need to compensate the landlord. If relief is granted by the court, the lease will be restored as if the landlord’s forfeiture action had never occurred.

Relief may be granted if the forfeiture was due to insolvency, provided the tenant can meet future obligations. The court will consider a number of factors, including the seriousness of the breach and will seek to ensure the matter is dealt with fairly, . Relief may be granted if the landlord’s actions were deemed unfair or if the forfeiture action is disproportionate to the breach.

Consequences of unlawful forfeiture

Unlawful forfeiture can have serious implications for landlords, including:

• Claims for damages: Tenants can seek damages for losses incurred due to unlawful forfeiture, including business disruption, loss of profits, and costs associated with relocating.
• Restoration of the lease: A court may order the lease to be reinstated, meaning the tenant can return to the premises and continue under the original lease terms.
• Legal costs: Landlords may be required to pay the tenant’s legal costs in addition to any damages awarded by the court.

What can tenants do if they experience unlawful forfeiture?

If a tenant believes their lease has been unlawfully forfeited, they should take the following steps:

• Seek legal advice: Immediate legal consultation is crucial to understand the available options and to act swiftly.
• Apply for relief from forfeiture: Tenants can apply to the court for relief from forfeiture, which, if granted, will reinstate the lease and allow the tenant to resume occupation of the property.
• Claim for damages: Tenants may also consider pursuing a claim for damages to compensate for any losses suffered as a result of the unlawful forfeiture.

Preventing unlawful forfeiture

Landlords can avoid the risks associated with unlawful forfeiture by:

• Ensuring proper notice: Always serve the correct notice and allow the tenant a reasonable opportunity to remedy the breach, if possible.
• Avoiding waiver: Be cautious about accepting rent or engaging in actions that might be construed as waiving the right to forfeit.
• Seeking legal advice: Before taking steps to forfeit a lease, it’s advisable to seek legal advice to ensure compliance with all legal requirements.

Unlawful forfeiture can lead to complex legal disputes and significant financial repercussions. Both landlords and tenants must understand their rights and obligations to avoid or address unlawful forfeiture effectively. By following proper procedures and seeking expert legal guidance, landlords can protect their interests while tenants can safeguard their rights to remain in the leased premises.