Forfeiture – practical tips

Outline

Following tenant default and if there is no break clause, forfeiture is the only remedy for a landlord wishing to unilaterally terminate a farm business tenancy under the 1995 Act.

Forfeiture is complex and a trap for the unwary. Delays in taking action can limit its utility.

Key Point 1: Upon gaining knowledge of a breach of tenancy, the landlord must act quickly and seek legal advice being mindful of any actions that might constitute a waiver (see Key Point 3)

Should the Landlord forfeit?

A valid contractual forfeiture clause gives the landlord the option of exercising the right to terminate the tenancy consequent upon a forfeiture event.

The tenancy will not end automatically. Upon gaining knowledge of the breach, the landlord must make an election – either to forfeit and bring the tenancy to an end, or to treat the tenancy as continuing.

Key Point 2: Is forfeiture the appropriate action? The landlord must consider all available options and make an election as soon as possible continuing to be mindful of waiver.

Action to be taken

If the landlord elects to forfeit, the appropriate course of action will differ, depending upon:

• Terms of contractual forfeiture clause
• Nature of Breach:
• Non-payment of rent
• Other breach of tenancy – s146 preliminary notice
• Remediable or irremediable?
• Tenant insolvency

After any Preliminaries are dealt with forfeiture is effected through:

• Service of court proceedings;
• Physical re-entry (bare land).

Waiver

Key Point 3: If the right to forfeit has arisen, the landlord must ensure that it is not inadvertently lost through waiver. 

If the landlord, or an authorised agent acting on his behalf, knowing of the breach, does anything which expressly or impliedly recognises the continuation of the tenancy and the landlord/tenant relationship = WAIVER.

Examples:

• Demand or acceptance of rent;
• Service of notices;
• Correspondence/communication with tenant.

If a waiver event occurs, the right to forfeit for the breach in question will be lost. Intention of landlord is irrelevant.

Waiver remains a real risk/issue until forfeiture has occurred.

For more information please contact Josie Edwards, Associate on josie.edwards@michelmores.com