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Forfeiture of Commercial Leases – A Practical Guide for Landlords and Tenants

Forfeiture is the landlord’s right to terminate the lease due to a tenant’s breach. This guide explains how this complex area of property law works.

Mark Oakley

Partner – Solicitor

Property Litigation

moakley@judge-priestley.co.uk

Forfeiture is a contractual right that allows a landlord to bring a commercial lease to an early end when a tenant has breached its obligations. It is a complex area of property law, governed by both the terms of the lease and statutory protections for tenants. Advice is always recommended to ensure that the right has arisen, and process followed correctly. This guide explains how forfeiture works, when it can be used, and what both landlords and tenants should consider.

What Is Forfeiture?

Forfeiture is the landlord’s right to terminate the lease due to a tenant’s breach. Most commercial leases contain an express forfeiture clause, which sets out the circumstances in which the landlord may end the lease, typically including:

Non-payment of rent
Breach of covenant (e.g., repairing obligations, unauthorised alterations, or unlawful use)
Insolvency‑related events

Without such a clause, landlords will generally have no right to forfeit save for in limited circumstances.

Any conditions of the Lease must have been met to ensure that the right has arisen. landlords often overlook this which can result in a claim for damages by the tenant. Therefore, advice is always recommended.

Forfeiture for Rent Arrears

Forfeiture for non‑payment of rent is the simplest route. In most cases:

The landlord may peaceably re‑enter the property (typically by instructing a certificated enforcement agent), or
The landlord may issue court proceedings seeking possession.

Unlike other breaches, no section 146 notice is required for rent arrears. However, the landlord must ensure that the rent is due and any preconditions are met and that it has not waived the right to forfeit by treating the lease as continuing; such as by demanding or accepting rent after becoming aware of the breach. Again, this is where landlords often make fatal mistakes, giving the tenant a right to claim compensation from the landlord.

Forfeiture for Other Breaches – The Section 146 Notice

Where the breach is something other than rent arrears, landlords must serve a notice under section 146 of the Law of Property Act 1925.

There are often disputes on whether the section 146 notice is valid as there are various requirements that must be met.

Only after service of a valid section 146 notice and a failure by the tenant to remedy the breach complained, can the landlord proceed to forfeit the lease.

Methods of Forfeiture

Peaceable Re‑Entry

This involves the landlord or an authorised agent physically re-entering the premises and securing them.

This method carries risk because a tenant may subsequently contend that the landlord did not have the right to forfeit, for example due to waiver, and can then claim compensation for losses incurred from being keep out of possession. Such claims are often coupled with an application for an order that the landlord allow the tenant to return to the premises pending trial of the issues in dispute.

Court Proceedings

As an alternative to peaceable re- entry, a landlord can issue possession proceedings. This route is safer and avoids the risks associated with re-entry. It is commonly used where:

The breach or right to forfeit may be disputed
The premises are occupied and a claim for compensation may be substantial

Relief From Forfeiture

Tenants have a statutory right to apply to court for relief from forfeiture, even after the landlord has taken back possession. Relief is discretionary and, if granted on terms that the breach is remedied with payment of the landlord’s costs, restores the lease as if it had never been forfeited.

Applications should be made promptly.

Waiver of the Right to Forfeit

A landlord must take care not to waive the right to forfeit after becoming aware of the breach. Waiver occurs where a landlord behaves in a way that recognises the lease as continuing.

Once a waiver has occurred, the landlord cannot forfeit for that specific breach. There are often disputes about whether a right to forfeit has been waived and it is important to carefully assess the question of waiver before commencing forfeiture.

Considerations for Landlords

Before proceeding with forfeiture, landlords should consider:

Is the breach clear and proven?
Does the lease contain an express right of forfeiture?
Has a section 146 notice been served (if required)?
Has forfeiture already been waived?
Could the tenant apply for relief?
Are there practical risks with peaceable re‑entry?

Professional legal advice is strongly recommended before taking action, as wrongful forfeiture can expose landlords to claims for damages.

Considerations for Tenants

Tenants facing forfeiture should:

Act quickly, especially if applying for relief
Review the alleged breaches and consider whether they can be remedied or if the right to forfeit has been waived
Take urgent steps to secure business continuity if re-entry is threatened

Prompt action often improves the prospects of preventing or reversing forfeiture.