Landlord Problems: Forfeiture of a Commercial Lease in Mixed Use Premises

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01 November, 2019

Stephen McArdle
Partner, Head of Commercial Litigation

In the second of our series of practical guidance on common landlord problems, we look at the issue of forfeiture of mixed-use premises.

Scenario: the landlord owns a mixed-use property let out to a tenant under one lease. The property comprises of a shop on the ground floor and a flat upstairs, which is accessed through the shop. The tenant has stopped paying the rent and the landlord wants to forfeit the lease.

What is Forfeiture?

Forfeiture is a unilateral and positive act by a landlord to bring a lease to an end due to a tenant's breach. It can only occur if the Lease has a provision setting out the right of the landlord to forfeit and in what circumstances.

The act of forfeiture cannot be retracted and, by its very nature, will have a severe impact on a tenant's business. It is critical the landlord forfeits correctly as otherwise a court will declare it void.

Forfeiture usually takes place by either:

  • Peaceable re-entry (entering the premises and changing the locks); or
  • Issuing Court proceedings for possession based on forfeiture and obtaining a court order.

In the above scenario, can the landlord forfeit by peaceable re-entry?

No. The law states that a landlord cannot forfeit by way of peaceable re-entry for premises "let as a dwelling" in which a person is lawfully residing.

Section 2 of the Protection from Eviction Act 1977 (PEA 1977) states:

Where any premises are let as a dwelling on a lease which is subject to a right of re-entry or forfeiture it shall not be lawful to enforce that right otherwise than by proceedings in the court while any person is lawfully residing in the premises or part of them.

The same position applies to mixed use premises as was determined in the case of Pirabakaran v Patel and another [2006] EWCA Civ 685.

The only exception to this rule is if the landlord "proves that he believed, and had reasonable cause to believe, that the residential occupier had ceased to reside in the premises" (section 1(2), PEA 1977). However, in practice this can be very difficult to prove.

Should the Landlord risk it?

No. The landlord would be committing a criminal offence by contravening these laws. The landlord would also face a claim by the tenant seeking:

  • A declaration that the purported forfeiture was wrongful
  • An injunction to allow the tenant back into possession of the property
  • A damages claim

What can be done?

Unfortunately, the only lawful approach in this scenario would be to commence court proceedings seeking possession of the premises based on forfeiture and obtain a Court Order to enforce the eviction.

What if the residential part of the property was let under a separate tenancy agreement and has a separate access to the shop?

Providing that the commercial letting (i.e. the shop) is leased entirely separate to that of the residential letting (i.e. the flat), both in terms of physical access and under a separate lease / tenancy agreement, then it may be possible to forfeit the commercial lease by peaceable re-entry, leaving the residential tenancy unaffected. The residential tenancy could only be able to be brought to an end by court proceedings by following the laws on possession and after the service of an appropriate notice.

In all cases, forfeiture is a notoriously complex area of law and we would always advise you to take thorough legal advice well in advance of attempting to forfeit to ensure that it is carried out correctly, in line with the lease provisions and the law.

For more information contact Stephen McArdle in our Business Dispute Resolution department via email or phone on 0333 207 1142. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Business Dispute Resolution department here

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