One of the greatest worries for a commercial landlord is the fact that there are times when a tenant cannot pay their rent. If you find yourself in this situation, you may consider whether to forfeit the lease. Here is a quick look at the circumstances that can lead to lease forfeiture and the benefits that it has for the landlord.
What is lease forfeiture?
If the commercial tenant has failed to pay the rent due and is in arrears, the landlord is entitled to forfeit the lease before the actual termination date stipulated in the contract. However, the landlord does not have an automatic right to forfeit, as this procedure depends on the actual clauses of the lease.
The lease must contain an explicit forfeiture clause in order for the landlord to start the forfeiture proceedings. In most cases, if a commercial tenant is in rent arrears, the landlord can begin the proceedings 14-21 days after the amount of outstanding rent is payable. After this time the landlord has the right to instruct certificated enforcement officers to enter the property and forfeit the lease.
By using the services of an enforcement agency like Able Enforcements landlords can be sure all proceedings are carried out according to the letter of the law. This is why it is called Peaceful Possession, we will always attend when the business is closed or not trading, enter the property and change the locks. If the tenant breaks back in to the property, then he has committed a criminal offence of trespass and criminal damage.
How can you avoid waiving the right of forfeiture?
When it comes to forfeiture of the lease, the landlord needs to be sure they do not accidentally waive their right to forfeiture. This can be done by acknowledging that a lease is still in place. Landlords often waive their right to forfeiture by accepting rent payments after the period of time that enables the start of the forfeiting procedure, or by demanding payment for outstanding rent themselves.
Landlords need to keep in mind that tenants have a right to apply for forfeiture relief, which is usually granted if they pay the entire amount owed as well as any costs the landlord may have incurred with the proceedings, this right can extend for up to six months after the property has been taken back. However, it is rare that the tenant applies for relief, especially if they cannot pay the rent or legal cost associated with the application.
Is forfeiture the best course of action?
Many times, landlords must ask themselves whether lease forfeiture is the best course of action. If non-payment is a one-time situation and the landlord wishes to maintain a good relationship with the tenant, then forfeiture of lease is not a good idea. However, if the tenant is a repeat offender, this may be the only course of action. If the landlord does not want to suffer financially and go through the process of sourcing new tenants, they can use CRAR to recover any arrears while the tenant continues in the property.