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Preservation of the Right to Forfeit a Commercial Lease

Once landlords have decided to forfeit a lease, they serve a Section 146 notice that informs their tenants of the situation. This document explains the tenant’s breach (e.g., non-payment of rent) that gave the landlord the right to forfeit the lease. The notice also offers the tenant a chance to remedy the breach within a reasonable period.

It would seem that the tenant’s compliance with the notice is the only thing that would prevent forfeiture of the lease. The landlord, however, could also inadvertently prevent forfeiture if he or she waives his or her right to the commercial forfeiture of lease.

Preservation of the Right to Forfeit

The period starting from the landlord’s decision to forfeit until the execution of the forfeiture and repossession of assets is an uncertain time for the landlords. This is because they might unintentionally do things that waive their right.

If you declare your intention to repossess your property but accidentally waive your rights, you won’t be able to terminate the lease. Here are things you should do to preserve your right to forfeiture.

Treat the Lease as Ineffective

Once you have decided to terminate the lease, you must assume that it no longer takes effect in the face of the breach. If you treat the lease as if it’s still existing, then you might lose the right to forfeit. So avoid demanding rent or other fees under the lease that are due in advance causes you to lose the right to forfeit. If, however, your demand notice did not reach the tenant, you retain your right.

Secondly, do not accept rent ,  this includes direct acceptance of rent or other dues under the lease between you and your tenant. If the tenant’s rent is accepted by an agent or a bank against your instructions, your right might also be waived. If they return the payment straight away, though, you might retain your right.

Thirdly, do not Make a Claim Under the Lease. Any claims you file in relation to the lease shows you recognise the lease. The action, consequently, waives your right. Levying distress also shows that you and the tenant still have a landlord-and-tenant relationship and may cause you to lose your right.

Lastly, do not Enforce Covenants Under the Lease. Issuing proceedings that implement the agreements in the lease shows you affirm that the lease still exists. For instance, you send bailiffs as part of a Commercial Rent Arrears Recovery process. It shows you still honour the lease, and you lose the right to forfeit it.

Restrict Communication with the Tenant

You should exercise caution because it’s easy for you to waive your right to forfeiture. It’s important to avoid saying or doing anything that shows you still recognise that the lease is existing.

So, it’s ideal to restrict communication with the tenant or their representatives. The parties should also limit discussions about the breach and forfeiture.

If interactions are unavoidable, then the two parties should engage in “without prejudice” communications. This rule prevents the other party from using the statements the landlord made during their conversations against the landlord. This, however, is not always effective.

It’s important to preserve your right to forfeiture until you have repossessed your assets. This ensures that you can terminate the lease confidently and achieve a positive outcome. For assistance for repossession of assets, contact MS Webb today.


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