Forfeiture of a Commercial Lease: A Guide for Landlords and Tenants

Forfeiture is a tool may be used by a landlord to terminate a lease in circumstances where a tenant is in breach of its terms. Typical scenarios include unpaid rent, breach of repair and maintenance obligations, unauthorised alterations or use, unlawful assignment or subletting or certain insolvency-related events.

This article covers the law in England and Wales in relation to leases of commercial properties.

Table of Contents

• What is forfeiture?
• When can a landlord forfeit a commercial lease?
• Legal requirements and restrictions (Section 146 explained)
• Waiver of the right to forfeit
• Methods of forfeiture
• Relief from forfeiture (tenant rights)
• Alternatives to forfeiture
• Practical considerations for landlords and tenants
• Key takeaways
• How we can help

What is forfeiture?

Forfeiture is a landlord’s right to bring a lease to an early end where a tenant has breached its terms. This right usually arises from an express forfeiture clause (often referred to as a ‘right of re-entry’) in the lease. If a lease does not contain an express forfeiture right, forfeiture may still be possible if the tenant has breached a term of the lease which is fundamental (although careful consideration should be given in such circumstances).

At the point that the Lease is forfeited, it has ended (subject to the tenant’s right to apply for relief from forfeiture, which is discussed further below). The landlord will immediately become responsible for the property, including, for example,payment of business rates and utilities.

When Can a Landlord Forfeit a Commercial Lease?

So long as a landlord has not ‘waived’ its right to do so (which is discussed further below), a forfeiture clause in a lease will normally set out the circumstances in which a landlord can forfeit (the type of breaches which will trigger the right, and when that right will be triggered), and any steps that the landlord needs to take first.

For example, the lease may state that a landlord can forfeit the lease if the rent remains unpaid for 21 days after the date that it has fallen due whether or not the rent has been formally demanded.

Where the only breach is non-payment of rent, in most cases a landlord does not need to give the tenant any notice of its intention to forfeit, however, where one or more of the breaches relied on is not non-payment of rent, the landlord will first need to comply with Section 146 of the Law of Property Act by serving notice upon the tenant.

Insolvency‑related events

Many commercial leases include provisions allowing forfeiture following certain tenant insolvency events, such as:

• Liquidation
• Administration
• The making of a company voluntary arrangement

Whether forfeiture is available will depend on the precise drafting of the lease and the type of insolvency event that has occurred.

In practice, insolvency-related forfeiture can be complex. Statutory restrictions may apply, and landlords often need to consider carefully whether forfeiture is the most appropriate response, particularly where there may be a prospect of recovery through an insolvency process or third-party guarantees.

Legal requirements and restrictions (Section 146 explained)

Where the breach relates to anything other than rent arrears, landlords are required to serve a notice under section 146 of the Law of Property Act 1925.

A valid section 146 notice must:

• specify the nature of the breach;
• require the tenant to remedy the breach, where it is capable of remedy; and
• allow the tenant a reasonable period to comply.
• Depending on the nature of the breach, certain other information may need to be included, for example, in cases of breach of repairing obligations, the notice may need to contain certain wording advising a tenant of its rights under the Leasehold Property (Repairs) Act 1938
• be validly served upon the legal tenant (the appropriate way to serve a notice upon a tenant will depend on the type of tenant and their location).

Waiver of the right to forfeit

One of the key risks for landlords is waiving the right to forfeit through their conduct. Waiver occurs where a landlord, with knowledge of a breach giving rise to a right to forfeit, acts in a way that treats the lease as continuing.

Common examples include continuing to demand or accept rent after the landlord has become (or should have become) aware of the breach.

The importance of waiver (and how fatal it is to a landlord’s right to forfeit) will depend on the nature of the breach being relied on. Breaches are categorised as ‘once and for all’ and ‘continuing’ breaches. Examples include:

• ‘Once and For All’ breaches tend to include:
  • Non-payment of rent
  • Not to make alterations
  • Not to assign the lease
• ‘Continuing’ breaches can include:
  • To keep the property in repair
  • To obtain planning permissions
  • Not to share occupation

Where a breach is continuing generally it is treated as if a new right to forfeit is triggered each day that the breach remains. As such, even if a landlord waives the right to forfeit, a new right will arise.

Where a breach is a once and for all breach, if a landlord takes any steps which can be seen as a waiver, the right to forfeit in respect of that particular breach is lost.

For example, let’s say a tenant is due to pay rent on the first day of each month and if the rent is not paid in 14 days, the right to forfeit is triggered. The tenant fails to pay rent on 1 March and on 16 March, the landlord sends a rent demand to the tenant demanding payment of the rent which will fall due on 1 April. By doing so the landlord has waived the right to forfeit the lease for non-payment of the March rent ( however in those circumstances, if the tenant fails to pay the April rent, a fresh right to forfeit may arise at that point). 

To minimise the risk of inadvertently waiving the right to forfeit a landlord should stop all communications with a tenant and cease sending rent demands once they become aware of any breach of lease whilst the breach is given full consideration and a decision is made as to whether a landlord wishes to forfeit the lease.

Methods of forfeiture

Peaceable re-entry

One way in which a landlord may forfeit a commercial lease is by peaceable re‑entry. This involves the landlord physically retaking possession of the property without issuing court proceedings.

Peaceable re‑entry usually involves the landlord, or its agents, attending the property and securing it, most commonly by changing the locks.

A notice is typically left at the premises confirming that the landlord has re‑entered and that the lease has been forfeited.

It is most commonly used where forfeiture is based solely on non‑payment of rent, as this does not require the service of a section 146 notice. Where the forfeiture is based on other breaches of covenant, peaceable re‑entry should only be attempted once any required section 146 notice has been validly served and the tenant has failed to comply.

Importantly, re‑entry must be genuinely peaceable. The landlord must not use or threaten force, and re‑entry should not take place while the premises are occupied.

Risks:

• Risk of unlawful re‑entry – if re‑entry is carried out incorrectly, the landlord may face claims for damages or unlawful eviction.
• Disputes over the breach – tenants may challenge whether a right to forfeit had arisen, particularly where breaches other than rent arrears are involved.
• Waiver issues – landlords must ensure they have not waived the right to forfeit before re‑entering.
• Disputes over Section 146 Notice – if the breach is non-payment of rent and the landlord hasn’t served a Section 146 notice and/or the validity of the Section 146 notice is disputed by the tenant this could lead to challenges about whether the right to forfeit has legally arisen. 

For these reasons, peaceable re‑entry is often approached with caution. Many landlords choose to take legal advice and instruct specialist agents to minimise risk and ensure the process is handled correctly.

Forfeiture by court proceedings

This involves asking the court to formally determine that the lease has been forfeited and to grant an order for possession of the property.

This may be necessary or advisable in circumstances where:

• the premises are occupied, making peaceable re‑entry impractical or unsafe;
• there is a dispute over whether a breach has occurred or whether the right to forfeit has arisen;
• the landlord wishes to minimise the risk of allegations of unlawful eviction; or
• insolvency‑related issues or statutory protections make self‑help remedies unsuitable.

Forfeiture by court proceedings is commenced by issuing a claim for possession, setting out the landlord’s right to forfeit and the tenant’s breach of the lease. If the claim is successful, the court will make an order bringing the lease to an end and requiring the tenant to give up possession.

Benefits:

• Greater legal clarity
• Reduced risk of challenge
• Provides legal basis for recovering possession

Risks:

• Slower
• More costly due to court fees and legal costs

Relief from forfeiture

Even where a landlord has validly forfeited a lease, the tenant (or a third party with an interest in the lease (for example a subtenant or a lender) may be entitled to apply for relief from forfeiture, so long as that application is made ‘promptly’. For cases involving non-payment of rent, an application should be made within 6 months but in all other cases, a tenant should not delay its application. Because of this right a landlord is often in a tricky situation  during the 6 month period following forfeiture and is often advised to be extremely cautious in granting any new tenancies during that period.

Relief from forfeiture is a court‑based remedy that can effectively reverse the consequences of forfeiture. It attempts to strike a balance between a landlord’s property rights and disproportionate outcomes for tenants.

If relief is granted:

• The lease is reinstated as if the forfeiture had not occurred
• Conditions may be applied, such as payment of arrears, costs and interest, compliance with reinstatement obligations, ongoing adherence to covenants and provision of securities or guarantees.

The availability of relief reflects the court’s recognition that forfeiture can be a harsh outcome, particularly where the tenant’s breach can be remedied or where the loss of the lease would be disproportionate to the breach.

Except in specific circumstances where forfeiture was solely because of non-payment of rent and the tenant has paid the arrears and certain other sums (in which case the Court has no discretion over whether to grant relief) the Court has discretion over whether relief should be granted and if so, on what conditions.

For landlords, this means that forfeiture may not always represent the final outcome, even where it has been validly exercised. For tenants, it provides a potential opportunity to preserve a valuable lease, albeit often at significant financial cost.

Alternatives to Forfeiture

It is also important to recognise that forfeiture is not the only remedy available. Alternatives such as Commercial Rent Arrears Recovery (CRAR), injunctions, debt claims or action against guarantors may enable a landlord to recover outstanding sums or deal with breaches without terminating the lease. These options are often preferred where the landlord’s commercial objective is to preserve the tenancy. It is important to note that by taking any alternative enforcement action, the landlord will most likely waive the right to forfeit and so, before doing so, a landlord should carefully consider whether it does, in fact, which to reserve the right to forfeit the lease.

Commercial Rent Arrears Recovery (CRAR)

CRAR allows a landlord under a lease of commercial premises to use the statutory taking-control-of-goods procedure to recover rent payable under the lease. This is a debt recovery tool rather than a course of action to terminate the lease.

Debt recovery

Depending on the lease, a landlord may prefer to pursue arrears through a debt claim, guarantor action, former tenant liability or rent deposit, rather than end the tenancy outright. It may be for example that the landlord isn’t confident of attracting a new tenant and would rather keep the current tenant whilst recovering debt.

Action against guarantors

Where a lease involves a guarantor, landlords may be able to recover rent arrears, ask the guarantor to fulfil the tenant’s obligations, or rely on an authorised guarantee agreement (AGA) where the lease has been assigned.

Negotiation

This may offer a practical and commercially sensible outcome. Negotiations could involve a payment plan for arrears, granting temporary rent concessions, varying lease terms or agreeing a surrender on negotiated terms.

Practical considerations

For landlords

Before pursuing forfeiture, landlords should take a step back and consider:

• Whether forfeiture is the right remedy: Does forfeiture align with a landlord’s wider commercial objectives? Would alternative enforcement options create a better outcome?
• Waiver risks: Demanding or accepting rent may result in losing the right to forfeit.
• Evidence and preparation: Gather the likes of records of rent arrears, inspection reports, relevant correspondence related to unauthorised works or use and evidence of insolvency events.
• Timing and strategy:

For tenants

For tenants, forfeiture can have immediate and significant consequences. Tenants should consider:

• Acting promptly following forfeiture: Speed is often decisive and any delay can weaken the tenant’s position in the courts. Early action also allows tenants to assess the landlord’s grounds for forfeiture, identify any procedural defects and create opportunities to remedy the breach.
• Preserving the right to relief: Tenants should act promptly and be ready to remedy any breach (e.g. paying arrears or complying with lease obligations) to support a strong application for relief from forfeiture.

The value of early negotiation and advice: Early engagement with the landlord and taking legal advice can help secure negotiated solutions and guide decisions on whether to pursue relief or alternative strategies.

Key takeaways

• Forfeiture is a powerful but technical remedy
  It can bring a commercial lease to an immediate end, but its effectiveness depends on strict compliance with contractual and legal requirements.
• Procedural missteps can be costly
  Errors around notices, waiver or the method of forfeiture can undermine a landlord’s position and expose them to challenge or claims.
• Early, specialist advice can protect commercial objectives
  Whether acting as landlord or tenant, taking advice at an early stage can help manage risk, preserve valuable rights and support informed commercial decision‑making.

How we can help

We support both landlords and tenants at every stage of the forfeiture process, from early strategic advice through to enforcement, dispute resolution and applications for relief from forfeiture.

Our commercial property team has extensive experience advising on helping clients navigate the technical requirements of forfeiture while keeping wider commercial objectives firmly in view.

If you are considering forfeiture, facing enforcement action, or would like to explore your options before matters escalate, speaking to a commercial property litigation specialist at an early stage can help you manage risk and make informed decisions.

Get in touch today to get started.