Commercial rent arrears & forfeiture – what are the options?

Where commercial tenants have stopped paying rent, landlords may be able to forfeit the lease which has the effect of bringing the lease to an end. 

The first stage for any commercial landlord considering forfeiture for non-payment of rent is to check that there is a right to forfeit in the lease. Any well drafted commercial lease should contain a forfeiture clause, but if the lease does not contain such a right, there is no right to forfeit. It is important to also consider whether any part of the property is residential. If it is, this will mean forfeiture is not an option.

Providing the lease gives the commercial landlord the right to forfeit, the landlord will then need to consider which method of enforcement is appropriate in the individual circumstances. The options are usually (1) forfeiture proceedings through the court; or (2) to change the locks in what is known as peaceable re-entry.

Peaceable re-entry involves instructing enforcement agents to attend the property, gain access to change the locks, and leave a prominent notice setting out what has happened. The court process, by contrast, involves making a formal application to the court and attending a court hearing to seek a court order for forfeiture.

The ultimate decision as to which method is appropriate will depend on practical, commercial and legal considerations. The experienced team at Machins are able to guide you through the various considerations when making this decision. For example, peaceable re-entry may not be a practical option if the property is subject to very high security measures due to difficulties in gaining access to the premises to change the locks. There may also be commercial considerations such as the marketability of the property once the lease has been forfeited, and the liability for business rates which may revert to the landlord.

If you are considering forfeiture, it is important to seek expert legal advice. It is easy to become unstuck when effecting forfeiture and a mistake could open you up to a damages claim for unlawful eviction or trespass.

We offer pragmatic, commercially-minded legal advice on forfeiture and all issues relating to commercial property.

For more information or advice, please contact Janice Young or Holly Baker.