When a tenant is in breach of the lease, most commonly because of rent arrears, the landlord has the right to forfeit the lease under Common Law by peaceably re-entering the property when the tenant is not present. This is most commonly achieved by changing the locks outside working hours, and most landlords choose to instruct a Certificated Bailiff to perform the forfeiture.

The effect of forfeiture is that the lease is terminated immediately.

Reinstating the lease

However, there may be circumstances when the tenant or both tenant and landlord want the lease to continue after the forfeiture. For example, the tenant has paid all the rent arrears and wants to remain in the building.

The process of reinstating the lease is called relief from forfeiture. The tenant must apply to the Court for relief under section 146 of the Law of Property Act 1925. If he does not and the landlord and tenant decide to continue their relationship without relief, their arrangement will be deemed to be a new lease.

This can have many disadvantages, especially for the landlord. The new lease would most probably not include any guarantees and may then automatically grant the tenant security of tenure as the new lease will not have been contracted out.

Who pays?

It is normal practice for the tenant to pay the court costs of both parties. In the case of Zestcrest Ltd v County Hall Green Ventures Ltd, the landlord agreed to the tenant seeking relief but insisted it be done through the court. The tenant felt the court process unnecessary so sought costs from the landlord. The court ruled that application to court was necessary and ordered the tenant to pay the landlord’s costs.

The court will normally grant relief to the tenant if he acts quickly, pays the arrears and landlord’s costs and remedies any breaches of covenant.

Time limits

If the landlord acted under a court order, then once he has enforced the order, the tenant loses the right to apply for relief.

The tenant’s right to apply for relief technically exists indefinitely, even after the landlord has changed the locks, although this is more in theory than in practice. However, if the landlord subsequently obtains an order for possession, then the right to apply for relief is lost.

New tenant already installed?

After forfeiture, the landlord may have let the property to a new tenant. In this case, the former tenant does still have the right to apply for relief, but the court will take into account factors such as the time delay in applying and whether the landlord acted quickly and unreasonably in granting the new lease.

If the court does rule in favour of the former tenant, then the new tenant becomes the former tenant’s landlord and the lease between the landlord and new tenant becomes an intermediate lease and the new tenant will have a claim in damages against the landlord.

In conclusion

The landlord should be aware of the tenant’s right to apply for relief when the lease is forfeited under Common Law and carefully consider whether they want to continue the lease, especially if concerned about the tenant’s ongoing ability to pay the rent!