Forfeiture, Unlawful Forfeiture
& Relief from Forfeiture

Early termination of a lease for breach of covenant may be brought about by forfeiture.

However, the law relating to forfeiture is archaic and complex and mistakes are often made. These mistakes can be costly.

Where a right to forfeit exists, a landlord can forfeit the lease either by effecting peaceable re-entry or by issuing forfeiture proceedings under CPR 55.

Whilst there are advantages for a landlord taking physical possession including it being quicker to recover possession than by using court proceedings, the prudent approach is usually to obtain a court order for possession.

The disadvantages of taking physical possession include the following:

• There is a risk that the tenant may apply to the court for the lease to be reinstated making it more difficult for the landlord to commercially exploit the premises.
• The tenant may have a claim for wrongful forfeiture and damages for loss of use of the premises which may be substantial.
• The landlord may become an involuntary bailee of items belonging to the tenant and left at the premises.

The difference between claims for wrongful forfeiture and relief from forfeiture is important for the following reasons.

In the case of relief from forfeiture, conditions of relief usually involve paying all arrears of rent / remedying any other breach of covenant and paying the landlord’s costs. Only a court can grant relief from forfeiture (although a consent order without a hearing is possible but only if the landlord agrees).

In the case of wrongful / unlawful forfeiture, the landlord’s actions amount to trespass, remedies for which are injunctive relief and damages, including damages for loss of business. Additionally, the landlord is reasonably likely to be liable for tenant’s costs. There is also the possibility of applying for an interim injunction to re-admit the tenant to the premises pending the court hearing some time away.

Forfeiture has been described as an equitable security the landlord has against non-payment of rent or other breaches of covenant by the tenant.

It is settled that after forfeiture has occurred, it is not possible for the parties as between themselves to agree to relief from forfeiture as this would create a new lease and not resurrect the old lease.

Relief from forfeiture may only be obtained by an application to the court  Zestcrest Ltd v County Hall Green Ventures Ltd [2011] 50 EG 60.

A landlord is unlikely to want to agree to a new lease as this has ramifications in respect of any guarantors and rights under Part II of the Landlord and Tenant Act 1954 to name but two.

If relief from forfeiture is granted by the court, the old lease is resurrected as if it had never been forfeited.

In the case of non-payment of rent by the tenant, relief from forfeiture is likely to be granted by the court provided the tenant is able to pay off the arrears and the landlord’s costs associated with the forfeiture.

In the case of breaches of covenant other than non-payment of rent, a court will usually grant relief if the tenant remedies the breach, pays the landlord’s costs of the forfeiture and is unlikely to breach its obligations in the future. Where the breach cannot be remedied, a court may still order relief if the tenant pays compensation.

The court, when exercising its discretion, will consider the tenant’s conduct, the seriousness of the breach, the value of the premises and the tenant’s financial status.

A tenant should not unduly delay an application for relief from forfeiture. In the county court, where forfeiture has been effected by peaceable re-entry, the tenant should apply for relief within 6 months although the application should be made with ‘reasonable promptitude’. Any unnecessary delay will make it harder to persuade a court to grant relief.