If a commercial tenant fails to pay their rent, their landlord may enforce their right to forfeiture and exclude the tenant from their property. However, a tenant may be able to apply to be let back into the property. This is known as relief from forfeiture. We look at applications from relief when a lease has been forfeited for non-payment of rent.
| Forfeiture
Briefly, forfeiture is a way for a landlord to end a commercial lease if the tenant breaches the lease. This can be for anything from rent arrears to unauthorised subletting or insolvency. There are two ways that a landlord can forfeit a commercial lease: issuing forfeiture proceedings and obtaining a court order, or peaceable re-entry. Peaceable re-entry is where the landlord takes back possession of the property by changing the locks. There is more information about forfeiture in this blog.
| What is relief from forfeiture?
Forfeiture, while a drastic remedy for a landlord, does not have to be the end. A tenant may apply to the court for relief from forfeiture. This is essentially an application by the tenant to overturn the forfeiture. The result is that the lease will be restored as if the forfeiture had never happened.
Where forfeiture has occurred owing to non-payment of rent, only the Court can grant an order for relief. The landlord and tenant cannot agree it without the Court’s consent.
| When can a tenant make an application for relief from forfeiture?
A tenant can apply for relief from forfeiture as soon as the landlord is ‘proceeding with the forfeiture’. This means either that the landlord has applied to the court for possession (up until they have taken possession by court order); or that the landlord has taken the property by peaceable re-entry and the tenant is out of time to make a claim for relief.
The rules on relief from forfeiture differ whether a tenant is in breach of lease for non-payment of rent, or something else. Here we look at non-payment of rent only.
The procedure for applications from relief from forfeiture for non-payment of rent depends on whether the application is in the County Court or the High Court. Let’s take each in turn.
| Relief from forfeiture for non-payment of rent in the County Court
Where the landlord has forfeited the lease by issuing proceedings, the tenant has a right to automatic relief. There are several opportunities where the tenant can obtain relief:
1 The tenant must pay all rent arrears, interest, and costs of the action. The tenant must pay this either to the landlord or into court, not less than five clear days before the first hearing of the landlord’s forfeiture proceedings. If this is done, the landlord’s forfeiture claim ends, and the lease is reinstated.
2 If the tenant does not obtain relief at the first opportunity, and at the first hearing the Court decides that the landlord is entitled to possession:
- The Court will order possession at a future date. This will usually be at least four weeks after the first hearing date.
- The tenant will have another opportunity to obtain relief if it pays all arrears, interest and court by the date for possession.
3 If the tenant does not obtain relief at the second opportunity and does not comply with the court order, the tenant has another opportunity to apply for relief. This application must be made within six months of the landlord recovering possession. The court will usually grant relief if the tenant pays all arrears, interest and costs; and if it is satisfied that the tenant will pay its rent and comply with the lease terms in future.
Where the forfeiture is by peaceable re-entry, the tenant can apply for relief within six months of re-entry. To be successful in making such an application, the tenant will need to first pay (a) any arrears and (b) the landlord’s costs.
| Relief from forfeiture for rent arrears in the High Court
Forfeiture claims (and therefore applications for relief) in the High Court are relatively uncommon.
Where the landlord issued forfeiture proceedings:
- The court may grant relief if the tenant pays the rent arrears and costs.
- Where there are at least six months’ arrears, if the tenant pays all the arrears and costs before the trial of the landlord’s forfeiture claim, the proceedings will be automatically discontinued.
- Where are at least six months’ arrears, the tenant has six months after the landlord takes back possession to obtain relief. This is on the condition that the tenant pays the rent arrears, costs and interest. The court may still refuse relief during this six-month period. Relief is not automatic.
- Where there are less than six months’ arrears, the court uses the six-month limit as a guide. It is not a strict time limit.
| Relief after peaceable re-entry and ‘reasonable promptitude’
Where the landlord forfeits by peaceable re-entry, the court has jurisdiction to grant relief. The court will consider the six-month limit as a guide rather than a strict time limit. Notwithstanding this, the court will only consider applications that have been made with “reasonable promptitude”.
When considering how promptly the tenant has made their application, the court will look at all of the circumstances. Usually, however, the longer the delay, the less likely a court will grant a tenant relief.
In the 2021 case of Keshwala v Bhalsod, the Court of Appeal looked at ‘reasonable promptitude’. It decided that even if a tenant applied within six months, they would not automatically be held to have acted promptly. A tenant must keep the landlord informed of their intentions and explain any delay. In this case, the tenant made their application within six months. However, they were not able to adequately explain why they took almost six months to make their application and did not explain matters to the landlord throughout.
Applications for relief from forfeiture are complex. Therefore, it is vital that you seek specialist legal advice at your earliest opportunity, whether a tenant wanting to seek relief, or a landlord facing an application. Call our commercial property disputes team on 0800 988 7756.
