Forfeiture Clauses in Leases PDF

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Summary

A summary of how forfeiture leases in clauses work, and the laws surrounding them....

Description

Forfeiture Clauses Purpose of Forfeiture Clauses Forfeiture clauses ensure the Landlord has the right to re-enter the Premises and end the lease before the contractual expiry date because the Tenant has breached a covenant in the lease. A Landlord does not have the right to forfeit the lease unless there are specific provision in the lease allowing them to do so.

Forfeiture for Breach of Covenant Exam Structure Identify the lease clause being breached (e.g. failure to keep the Premises in good repair/breach of alienation provisions). Identify the forfeiture clause allowing the Landlord to forfeit the lease. Explain if notice is required: Before exercising the right to forfeiture, the Landlord must serve a s.146 LPA notice on the Tenant. The forfeiture clause is only enforceable if the s.146 notice has been served on the Tenant. Notice is required for all leases granted for a term of more than 7 years with at least 3 years left to run (s.51(1) LTA). Explain what will be in the notice: The s.146 notice must set out the breach caused by the Tenant, require the breach to be remedied if possible (unauthorised alterations or immoral use cannot be remedied) and set out any compensation the Tenant is required to pay to the Landlord. The notice must state the Tenant has 28 days to serve a counter-notice which required the Landlord to seek court approval before proceeding with forfeiture (s.1 LP(R)A 1938). Identify any other remedies which may be available to the Landlord: Action for damages - s.18 LTA limits the amount recoverable to the reduction in the Landlord’s reversion; Security - the Tenant’s security or rent deposit can be used if the deed allows for this; Self-help - if there is a Jarvis v Harris clause then the Landlord can enter the Premises, carry out repairs and then sue the Tenant to recover the costs as a debt. Specific performance - requires the Tenant to comply with the obligation placed on them (this is rarely granted).

Forfeiture for Non-Payment of Rent

Exam Structure Identify the lease clause being breached (i.e. failure to pay rent). Identify the forfeiture clause allowing the Landlord to forfeit the lease. Explain if notice is required: Where the breach is non-payment of rent, no s.146 notice is required (s.146(11)). Identify any other remedies which may be available to the Landlord: Action for damages - the Landlord may only issue proceedings to recover rent that has fallen due in the 6 year period prior to the issuing of proceedings; any earlier outstanding rent is irrecoverable. Security - the Tenant’s security or rent deposit can be used if the deed allows for this; alternatively, the guarantor can be forced to pay. Commercial Rent Arrears Recovery (CRAR) - this allows the Landlord to seize goods on the value of the sum owed, after serving notice. Enforcement agents can take control of goods belonging to the Tenant as long as more than 7 days rent is due. Service charges cannot be recovered in this way. The 6 year rule also applies....