Please note that this News item is not maintained, and reflects the law as at the date of publication or update.
Most commercial leases contain a provision for the landlord to forfeit a lease when the tenant is in breach of a covenant or on the occurrence of a certain specified event. Forfeiture essentially means ending the lease.
The lease provisions need to be carefully considered and complied with.
However, even if the provisions are complied with there is a danger that a landlord might waive his right to forfeit. This can happen inadvertently. If it does, it means there is no right to forfeit and any action taken by the landlord to take back possession of the property will probably be unlawful.
What is waiver and when can it happen?
If a landlord is aware of a breach event that entitles them to forfeit the lease they must take care not to do anything which treats the lease as though it is continuing. The classic example is where a landlord is aware that a tenant has sub-let, which is a breach of the tenant’s covenants and which entitles the landlord to forfeit the lease, and after he finds this out he accepts a payment of rent from the tenant. The acceptance of rent treats the lease as continuing and thus the landlord loses his right to forfeit the lease for the sub-letting breach.
There is a difference between ‘once and for all’ breaches and continuing breaches. If it is a ‘once and for all’ breach the landlord’s right to forfeit for that breach is lost forever. However, where the breach is a continuing one the right to forfeit similarly continues.
Examples of once-and-for-all breaches include:
- Breach of a covenant to carry out repairs by a specified date.
- Breach of a covenant to pay rent.
- Breach of a covenant against assigning or subletting.
- Breach of a covenant not to make alterations.
Examples of continuing breaches include:
- Breach of a covenant to keep in repair.
- Breach of a user covenant.
- Breach of a covenant to insure.
Each case will always need to be considered on its facts. A good example of this is a case in 2024 (Tropical Zoo Ltd v Hounslow LBC [2024] EWHC 1240 (Ch)) in which the tenant was required to construct a zoo in a certain period of time. The tenant failed. This was a once and for all breach which meant that once the landlord knew, he had to elect whether to treat the lease as continuing or take steps to forfeit. Here, the tenant argued that the landlord had waived his right to forfeit the lease for the breach because the tenant continued to pay rent to the landlord’s agents. The agents did return the rent paid to the tenant but there was a delay before the agents returned the rent. On the facts of the case the court found that the continued payment of rent by the tenant was “purely a tactic to attempt to engineer a situation of waiver of forfeiture”. He noted that the agents’ delay was down to the agents and the bank in returning the money promptly.
Landlords need to act with caution where there are breaches where they wish to elect to forfeit the lease.
