Relief from forfeiture – what happens if the tenant forgets to pay the rent?
If a tenant is not paying rent or service charges, or has breached other terms of the lease, the landlord has a right to end the lease by forfeiture. This is an important protection for a landlord of commercial property, but it can seem harsh for a tenant whose business is going through a difficult patch or who has simply forgotten to make a payment. If a landlord threatens to forfeit, the tenant needs prompt legal advice about what to do.
A recent case in the UK Supreme Court, The Manchester Ship Canal Company Ltd v Vauxhall Motors Ltd, is a reminder to landlords and tenants that forfeiture is a powerful remedy.
‘The threat of losing your business premises if you have not paid the rent will really focus a tenant’s attention’ says Stephen Robillard, property litigation solicitor with Parnalls Solicitors in Launceston.
‘In practice, most landlords would rather keep their tenant than go to the trouble and expense of forfeiting and finding a new tenant. The law has built-in protections for the tenant, which give the tenant the chance to put the breach right and stop the threatened forfeiture.’
Before forfeiting the lease, the landlord must follow the correct statutory process:
- serving a formal notice (known as a section 146 notice) on the tenant;
- identifying the breach;
- requesting that the tenant remedies it; and
- setting a reasonable time for the tenant to comply.
If a tenant has simply forgotten to make a payment, this should be enough to prompt them to sort it out. If a landlord claims the lease is forfeited without having served a notice, the tenant’s solicitor will be able to challenge the landlord.
If the tenant does not remedy the breach within the time set out in the notice, the landlord can take steps to bring the lease to an end. At this point, the tenant’s solicitor will be checking to see whether the landlord has inadvertently waived the right to forfeit by doing something that recognises a continuing landlord and tenant relationship. The most obvious example is accepting rent or some other payment.
Even if the landlord has correctly followed the relevant steps, it is not the end of the road for the tenant. Because losing premises is such a serious penalty, the courts have a wide discretion to grant the tenant relief from forfeiture. In practice, this means the court can give the tenant a final chance to pay what it owes and put right any breaches in return for having the lease restored.
The court will look at a range of things before it decides whether to allow relief, including the tenant’s conduct, and the impact on the tenant of losing their premises compared to the impact on the landlord if relief is granted. A tenant who has got behind with rent because their business is going through a difficult patch, but who has otherwise complied with the lease, is likely to get a more sympathetic hearing than a tenant who has regularly failed to do what the lease requires.
Sometimes a business will occupy a property under a licence instead of a lease. This is a less formal personal arrangement between the landowner and the occupier and does not give the occupier the same rights it would have as a tenant under a lease. In particular, someone occupying under a licence would not usually be able to claim relief if the licence was forfeited.
This issue has recently been examined, first in the Court of Appeal and now the Supreme Court, in a dispute over a licence allowing Vauxhall Motors to discharge water and effluent into the Manchester Ship Canal. Vauxhall forgot to pay a small licence fee, so the landowner tried to forfeit the licence. Both courts ruled that because Vauxhall had built the infrastructure used to discharge waste into the canal and had been given an exclusive right to use it, it was in possession and so should be allowed relief from forfeiture. This was a striking decision, but the circumstances were very unusual. Anyone occupying their business premises under a licence should still be aware that they probably would not get relief if the landowner forfeited the licence.
If a landlord threatens a tenant with forfeiture, the tenant’s solicitor will know what the tenant should do to protect their business premises. Knowing the rules and acting promptly will give the tenant the best chance of success. The ideal outcome for both landlord and tenant is that the tenant pays any outstanding rent or service charge and puts right any breaches of the lease, so that the landlord keeps its tenant and the tenant can get on with their business.
For further information, please contact Stephen Robillard in the litigation team on 01566 772375 or email firstname.lastname@example.org
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
Valuing an estate for probate
Do I need a cohabitation agreement?
Have you had an accident involving a horse?
Planning, Construction & Development
Preparing to sell your Launceston property
The Need for Updating Wills
Debt recovery and how we can help
Claiming compensation for a serious road traffic accident
Residential Sale and Purchases
Information to gather for your probate solicitor
Accidents, Compensation & Personal Injury
What type of will do I need?
Had an Accident in Someone's Home?
Ten common debt recovery mistakes
How to choose an executor to administer your estate when you die
The ultimate personal injury and accident claim checklist
Putting your legal affairs in order
Your responsibilities when you have people working in your home
10 reasons to appoint a Personal Injury solicitor
The risks of DIY probate
Does your lawyer progress your accident claim efficiently and provide you with a personal and professional service? Can I change solicitors for my accident claim?
Why you should always use a solicitor to prepare your will
Five problems with a leasehold property
Making a will when you retire
Buying your first home with a small deposit
Site assembly for commercial development
Meeting your conveyancing solicitor, what you need to prepare
Landlords’ options for enforcing commercial tenants’ obligations
Untangling Overseas Assets
KATHERINE FLASHMAN KITSON CELEBRATING 25 YEARS AS A DIRECTOR OF PARNALLS
Do you know the difference between…
When to consider appointing a professional attorney
Should I get a cohabitation agreement?
The Right to Make Noise
Ill-health pension transfer not liable for IHT
Legal Time Limits - why so important?
Would you pay a premium for a south-facing garden?
Video-witnessed wills to be made legal
New Planning Relaxation Is Not the Whole Storey
How to minimise delays in obtaining Grant of Probate
Could you benefit from the Green Homes Grant?
A SHOCK TO THE SYSTEM: new electrical safety regulations for residential tenancies
Property of Cornish residents who die without a will goes to Prince Charles
What effect could the new changes to stamp duty have on property sales?
Staying safer in video meetings
Making Sure Your Great New Home Comes With Clean Air
Property Market Re-Opens in England
Coronavirus: Wills and Powers of Attorney FAQ
Medical Care Received Not Up to Scratch?
Accident or Injury Involving a Dog?
Social Distancing No Obstacle for Parnall's Mobile Document Signing Team
Coronavirus (COVID-19) and Commercial Property Legal FAQs
Rent Charge Suspensions: Protecting Your Interests
Been Asked to Sign an Employment Settlement Agreement? Seek Advice Urgently...
Services Update: Continuity of Legal Service Provision
Advising You in Uncertain Times
Could carelessness on social media land you in court?
Is an electronic signature on a commercial property document acceptable?
What happens when there is no health & care LPA in place
Social Media Training for Businesses
Gazundering, what it is and how to avoid it
Relief from forfeiture – what happens if the tenant forgets to pay the rent?
Not so safe at work - compensation for an accident at work
New organ donation law: giving you control
Running a business from home
Have nude photos of you or your teenager been posted online?
Landowners’ rights and the Electronic Communications Code
Building in your back garden
Christmas is a time for giving (and inheritance planning)
Buying the freehold of your leasehold house
Redeveloping an empty pub for commercial use
Why it takes time to obtain the Grant of Probate
Social Media: The unconscious privacy threat
Is your reputation being threatened?
Making a will after your spouse or partner has died
Interns celebrate completion of internship at solicitors
Selling your home in a flat market, some top tips
New Media and Communications Court list reflects surge in internet defamation claims by Laura Baglow
Has your personal information been shared without your permission?
Planning your escape to the country, what you need to consider – part 2
Government consultation on new national model for shared ownership
Choosing a partnership structure
Planning for what happens when you die by Deborah Adams
Changes to legislation could offer protection for tenants in the private rental sector
Move to the country - Part One
Will your septic tank still be legal in January?
The death knell for ‘kiss and tell’?
Selling your property at auction
Not looking so good - your guide to compensation for botched non-surgical cosmetic procedures
New threshold of seriousness in defamation proceedings
Legal considerations when building a granny annex
Choosing the right person for your power of attorney
Formal Interviews - Do you need legal representation?
Privacy rights and aerial images
Trustees’ duty to give information to beneficiaries
Taking your first commercial lease
Is your organisation protected from employee social media legal risk?
Have you been targeted by negative social media posts?
Farmers be alert when being inspected
Help for House Sellers?
Don’t let your digital assets end up in a digital grave
Development proposals and your local authority search
What can you do if your child is injured in a serious accident
NetRights welcomes new protection for social media users
SHOULD I GET A LAWYER FOR A SPEEDING OFFENCE?
Supreme Court recognises that social media is a “casual medium” in libel battle
Choosing the best conveyancer who is right for you
Making a will after a second or subsequent marriage
Option or promotion agreement – which is best for landowners?
Anonymous pub and restaurant online reviews leave a bad taste
Help to Buy – beware of some cracks in the structure
Understanding Lasting Powers of Attorney
Changes to Energy Performance Certificate for Landlords
Had a cycling accident? Your route to obtaining compensation
New year, new home: tips to sell your home in the New Year
Tax Planning for your inheritance
Hearing loss: when your employer may be liable
Buying a home for your retirement, five things you need to consider
Farmers plan to diversify after Brexit
Ministers press ahead with probate fee shake-up - reports BBC News
Botched dental treatment? You may be entitled to compensation
Why a Health and Welfare Power of Attorney is a good idea
Will the new charge on building developments in Cornwall affect you?
Energy Performance Certificates – Do They Matter?
HMRC Challenging Stamp Duty Land Tax Payments
Ben Mitchell qualifies as a solicitor
The potential implications of Brexit on employment law
Appointing a guardian for your children
Houses in multiple occupation – new rules from October 2018
New Agriculture Bill published
Will Brexit affect my pension?
Dreaming of a holiday home? Sort out the legals before putting your feet up
Lasting Power of Attorney by Deborah Adams
Settled status after Brexit by Alexis Hager
How overage agreements can boost profits from your land
Top tips for first-time buyers
How Could Brexit Affect My Farm?
Wills & Succession in Spain by Deborah Adams
Brexit – an international and local view by Alexis Hager, Litigation
Capital gains tax - important facts for non-residents of the UK
Buying a home: the importance of making sure the seller is entitled to sell
Changing a will after someone has died: it is possible and it could save you money
Sad passing of Battle of Britain pilot who served with Parnall family member
Considerations when buying a heritage property
Disciplinary proceedings at work: guide for employers
Employers should have a disciplinary process in place, but just following this may not be enough to avoid falling foul of the law and exposing yourself to the risk of an employment tribunal claim.