Right to forfeit after the lease has expired
By David Asker on
The contractual right to forfeit the lease of a commercial property will usually be included within the terms of the lease. This allows the landlord to re-enter the property to take possession before the expiry of the lease and to end the lease due to a breach in the terms of the lease.
If there is no such clause in place within the lease, then the landlord will have to rely on the Common Law right to forfeiture, which is only available for the non-payment of rent. The contractual right is also only exerciseable for non-payment of rent.
But what happens if the lease has expired?
A written lease for commercial premises is a contract covered by the Landlord & Tenant Act 1954 (the Act). Sections 24 to 28 of the Act gives the tenant the right to remain after the expiry of the contractual term and the right to a new lease.
When the contractual term of a lease which is protected by Sections 24-28 of the Act expires, the tenant can hold over, i.e. the lease continues as a statutory extension under Section 24. This means that the right to forfeiture continues.
Leases excluded from sections 24-28 of the Act
A lease may be excluded from the Act by the Landlord serving a warning notice on the Tenant prior to the start of the tenancy and the Tenant providing a statutory/simple declaration. This will also be referred to in the lease itself.
If the lease has been contracted out of the Act, the lease will terminate at the end of the contractual term and the tenant does not ‘hold over’.
If the tenant remains at the property after the term has expired when the lease has been ‘contracted out’, this will either be under a ‘tenancy at will’ or a new lease.
Tenancy at will
Usually, when a contracted out lease expires and the Landlord and Tenant both wish to continue the relationship, they will start to negotiate a new lease. During the negotiation period between the expiry of the old lease and finalising the new lease, the Tenant’s occupation will be a ‘tenancy at will’.
There will be no right to forfeit a tenancy at will, however, either party can terminate a tenancy at will at any time.
If the parties cannot agree, the court has the right to impose terms and there will be a holding over until those terms have been agreed or determined by the Court under the provisions of the Act.
If the parties do not discuss or negotiate terms for a new lease once a lease which has been contracted out expires and the tenant carries on paying rent, a relationship of landlord and tenant is created by the payment of rent. This is, effectively, a new lease and the terms of the old lease, including the forfeiture clause, will no longer apply.
The Landlord may still forfeit the lease but only for non-payment of rent and on the basis of the common law right to forfeit.
Tenant eviction options
Where there is no forfeiture clause within the lease, it may be possible to remove the tenants under Common Law.
Alternatively, the landlord will need to go to court to obtain an order for possession and then have it enforced.
The order for possession may be transferred to the High Court for possession by a High Court Enforcement Officer (HCEO). Leave to transfer up under Section 42 of the County Courts Act 1984 will be required from the Court.
David is an authorised High Court Enforcement Officer and our Director of Corporate Governance