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What can you do when your commercial tenant breaches their lease?

What steps you can take to remedy a breach depends on the type of breach, what the lease says and what your aims are, in relation to the property. By your aims in relation to the property, what we mean is whether, for example, you want to get the tenant out of the property or you just want your tenant to put the breach right and then remain.

Forfeiture

Forfeiture is the process whereby the landlord re-enters the property, takes possession of it back from the tenant and brings the lease to an end. Your lease should set out the circumstances in which the landlord is allowed to forfeit the lease. However, there are a number of limitations to the landlord’s right to forfeit and it is very important to always take legal advice before you take any steps to repossess the property. If you get the forfeiture wrong and it is deemed unlawful then you could face a claim for very substantial damages from your tenant.

For all breaches of the lease, apart from the non-payment of rent, an essential first step is to serve on the tenant what is called a Section 146 Notice. The Section 146 Notice warns the tenant about the alleged breaches of the lease and tells them that the breaches must be remedied.

If a Section 146 Notice has been served and your tenant has failed to comply with it, then this strengthens your potential right to forfeit the lease. However, you should always take legal advice before taking any steps due to the potential consequences of getting it wrong.

Even if you have lawfully forfeited a lease, your tenant still has a right to apply to Court for what is called “relief against forfeiture”. This is where your tenant can make an application for the Court to use a discretion to order the lease to be reinstated.

One thing you have to be careful about when considering forfeiture of the lease is not to do anything which could be interpreted as you waiving.

Waiving of the breach can happen inadvertently when you do something that implies that you are happy for the lease to continue, even though it has been breached. One example of this would be to continue to collect rent whilst the lease has been breached. It would be advisable to stop the collection of rent as soon as you have identified any breach on the part of the tenant which could potentially result in you forfeiting the lease.

Breach of repair covenant

In nearly all commercial leases there is a covenant/condition in there that the tenant has to repair the premises. Most leases also have a clause where the tenant is in breach of their duty to repair, the landlord has the right to go into the property, carry out the repairs themselves and then recover the costs from the tenant.

If the clause in the lease that has been breached relates to repairs, then you usually have the option of entering and doing the repairs yourself.

Damages

This is where the tenant has breached the lease and, as a result, you, as landlord, have suffered some kind of loss. An example of this might be if a tenant breaches their lease in such a way that the value of the premises was diminished or if they caused another tenant in the building to leave due to their actions. In this case, you would have the right to make a claim to the Court that the tenant has to pay you damages to make good what you have lost.

Injunctions

Where there is a continuing breach of the lease, for example, the premises are being used for an unauthorised use, then you have the option of applying to Court for an injunction against the tenant to bring the breach to an end.

If you are to apply for an injunction, it is usually good practice to serve a Section 146 Notice at the same time.
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