Landlord Rights for Lease Forfeiture Due to Rent Arrears
Lease forfeiture is a key tool for landlords when dealing with tenants who don’t pay rent. Knowing the legal framework and process for lease forfeiture in the UK will help landlords exercise their rights and stay within the law.
Understanding Lease Forfeiture
Lease forfeiture is a landlord’s right to end the lease and take back the property because of a tenant’s breach of the lease (e.g. rent arrears). This must be stated in the lease agreement (Wright Hassall).
Conditions for Forfeiture
For a landlord to forfeit a lease due to rent arrears, specific conditions must be met:
- Clause in the Lease: The lease must contain a forfeiture clause that specifies the landlord’s right to re-enter the property if rent is unpaid.
- Unpaid Rent: Typically, rent must be overdue by a specified period, often 14 to 21 days, as outlined in the lease.
- Compliance with Section 146 Notice: Under the Law of Property Act 1925, landlords must serve a Section 146 notice to the tenant, detailing the breach and giving them the opportunity to remedy it.
Methods of Forfeiture
Landlords can forfeit a lease through two primary methods:
- Peaceable Re-Entry: This is where the landlord physically re-enters the property, often by changing the locks when the premises are unoccupied. This is quick but must be done without confrontation to avoid legal issues.
- Court Proceedings: This is where the landlord applies to the court for an order to repossess the property. Although longer and more expensive, this is legally correct and will give a clear outcome.
Waiver of the Right to Forfeit
Landlords must be cautious not to waive their right to forfeit. A waiver can occur if the landlord continues to accept rent or acknowledges the lease’s continuation after becoming aware of the breach. Activities such as negotiating payment plans or utilizing Commercial Rent Arrears Recovery (CRAR) can also constitute a waiver.
Relief from Forfeiture
Tenants can apply to the court for relief from forfeiture and get to keep the lease if they remedy the breach, usually by paying the arrears and costs. The court has discretion to grant relief depending on the circumstances.
Alternatives to Forfeiture
Before proceeding with forfeiture, landlords might consider alternative measures:
- Commercial Rent Arrears Recovery (CRAR): This process allows landlords to seize and sell the tenant’s goods to recover rent arrears. However, this waives the right to forfeiture.
- Debt Recovery Proceedings: Landlords can pursue a County Court Judgment (CCJ) for the unpaid rent, leading to further enforcement actions like garnishing wages or seizing assets.
- Insolvency Proceedings: Landlords can apply to make the tenant insolvent, which can pressure the tenant to settle debts but involves risks of competing creditors.
FAQs
Q: What is a Section 146 Notice? A: A Section 146 Notice is a legal requirement for landlords to inform tenants of a breach and give them an opportunity to remedy it before proceeding with forfeiture.
Q: Can a landlord change the locks without notice? A: Landlords can change the locks through peaceable re-entry only when the premises are unoccupied and without using force or causing confrontation.
Q: What happens if a tenant applies for relief from forfeiture? A: If the court grants relief the tenant can keep the lease, usually by remedying the breach and paying the costs. The court has discretion depending on the circumstances of the case.
Q: How does CRAR affect the right to forfeit? A: Using CRAR waives the right to forfeit, as it signifies the landlord’s intention to continue the lease by recovering arrears through the tenant’s goods .
Conclusion
Forfeiture of lease due to rent arrears is a powerful tool for landlords but must be done with care to avoid legal traps. By knowing the legal requirements, methods and potential waivers landlords can navigate the process and protect themselves. Always seek legal advice to ensure you comply with all the procedures and make informed decisions based on your circumstances.
