Lease forfeiture can sometimes be a must for landlords. but when is the time to resort to this option? Let's find out.
UK landlords and property managers need to face daily challenges to ensure a smooth service and steady income streams.
Dealing with tenants and monitoring properties is nothing short of a full-time job.
Especially when managing large property portfolios.
Tenants who breach lease agreements or fail to meet their obligations present a constant worry for landlords.
In such cases, landlords may consider resorting to forfeiture of lease to reclaim possession of the property.
This is commonly exerted through the landlord's peaceable re-entry.
However, lease forfeiture requires careful consideration and adherence to specific legal procedures.
What is Forfeiture of Lease?
Forfeiture of lease refers to the one-sided termination of a lease agreement by the landlord. Lease forfeiture is a contractual right preserved under Section 24 (2) of the Landlord and Tenant Act (1954).
In short, lease forfeiture allows the landlord to repossess the property and terminate the tenant's right to occupy it.
Nonetheless, it is not always possible resorting to forfeiting a lease. The availability of this option depends on both the tenants' behaviour and contractual arrangements.
The Forfeiture Clause or 'Proviso for Re-entry'
The forfeiture clause, or "proviso for re-entry," is a contractual provision typically included in lease agreements.
This clause grants the landlord the right to re-enter and repossess the property in case a tenant violates the terms of the lease.
Proviso for re-entry outlines the specific circumstances under which forfeiture may occur.
Naturally, the forfeiture clause also includes all the necessary procedures needed to enforce this contractual right for landlords.
Triggers of Lease Forfeiture
There can be several triggers of lease forfeiture, each depending on the specific contractual agreement and other contextual factors.
Yet, there are some common reasons that usually lead to forfeiture of lease - at least when landlords can find no other solution.
Additionally, depending on the triggers of forfeiture, landlords will have to face different legal implications.
Let's now review the most common triggers of lease forfeiture.
Non-Payment of Rent
Failure to pay rent on time or the build-up of arrears is one of the most common causes of lease forfeiture.
This is hardly surprising since landlords depend on rental income to cover expenses and maintain the property.
When tenants stop paying rent, landlords have a right to mitigate losses by considering lease forfeiture.
Unauthorised Subletting
Apart from occasional exceptions, lease agreements require tenants to get permission from the landlord before subletting to others.
Subletting without permission can be troublesome, as it undermines landlord's control over the property.
Despite contractual barriers, subletting is a widespread problem for landlords across the UK rental market.
Landlords may pursue forfeiture if they discover unauthorised subletting.
This reaction becomes essential, especially when sub-tenants pose significant risks to the integrity of the property.
Damaging the Property
Tenants have a responsibility to maintain the property in a reasonable condition, making sure to not disturb neighbours or other occupants as per their lease agreement.
If a tenant damages the property or causes nuisances, landlords may deem forfeiture necessary.
Troublesome behaviours include hosting 'wild' parties, conducting illegal activities, or just extensive and continued neglect to the property.
In such cases, forfeiture of lease becomes a powerful instrument for landlords to protect the property.
Other Types of Breaches
Lease agreements typically contain a range of provisions outlining the rights and responsibilities of both landlords and tenants.
Any material breach of these terms may warrant forfeiture action.
Depending on your contract, some other types of breaches might be:
- Tenants' insolvency or liquidation
- Improper use of the property
- Change of use without permission
- such as unauthorised alterations to the property
- failure to comply with health and safety regulations
- violation of other covenants
Landlords must carefully review the lease agreement to identify breaches and assess their severity before considering forfeiture.
Steps to Take Before Forfeiture of Lease (for Landlords)
Forfeiture of lease is certainly an effective solution when things start going downhill.
However, it is reasonable for landlords to consider some preventive measures before forfeiture.
Reviewing Lease Agreement
The last thing any property manager would want is to make unjustified claims against tenants, fostering poor relationships.
Before pursuing forfeiture of lease, landlords must ensure compliance with legal procedures outlined in the lease agreement and relevant legislation, such as the Law of Property Act 1925 and the Landlord and Tenant Act 1954.
Reviewing the lease agreement is vital to assess that the conditions of the forfeiture clause are met.
Serve Notice
Landlords cannot resort to forfeiture of lease without serving a formal notice to their tenants.
This notice needs to specify the nature of the breach, providing an opportunity to remedy the situation within a reasonable time.
The Law of Property Act 1925, Section 146 specifies all the requirements landlords must meet to lawfully serve the notice.
The notice will instruct tenants to address the problem - if possible - and pay for the breach they are accused of.
Depending on the nature of the breach, these conditions may change, becoming more or less stringent for tenants.
Once the notice is served, forfeiture of lease only becomes enforceable should the tenants fail, "within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach".
Document Communications
Lease forfeiture can be complex as tenants may have the right to appeal to the court for relief.
Depending on the circumstances of the case, the court may grant relief at their discretion. Usually, relief may take the form of paying outstanding rent or remedying the breach of lease.
Court proceedings may involve hearings, evidence presentation, and judicial decisions based on the merits of the case
This is why it is important to keep detailed records of all communications with the tenant regarding the breach of lease.
Written notices, emails, and any responses received can be a game-changer in case of a prolonged dispute.
Consider Alternative Solutions
As we have seen, forfeiture of lease, although effective, is considered a last resort that carries many potential issues.
When possible, property holders should thus explore alternative solutions to resolve the dispute peacefully.
Negotiating a repayment plan for rent arrears or using mediators to address disagreements can, sometimes, save time and money to both parties.
Plus, you may avoid the challenge of finding new tenants - and new income streams - in a short time.
Certainly not a small advantage.
Property Protection with Title Guardian
Forfeiture of lease is a significant legal action that landlords may consider when faced with tenants who breach lease agreements or fail to meet their obligations.
In other words, forfeiture of a lease is at the landlord's disposal in cases where tenants become a real problem.
Yet, property portfolio management is a complex job that can quickly become draining.
Technology can represent a turning point in portfolio management, easing the pressure off landlords.
Title Guardian boasts high-tech softwares and monitoring systems to offer constant vigilance to portfolio holders against property fraud: when suspicious activities take place, Title Guardian instantly informs users through app or desktop notifications.
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