Forfeiture in residential tenancies

Certain types of tenancies, such as common law tenancies where the annual rent is over £100k or tenancies let to a company tenant, fall outside of the usual s8 and s21 procedure. Forfeiture is a procedure that allows a landlord to evict a tenant if there has been a breach of a term of the tenancy, most commonly rent arrears. If the tenant falls into rent arrears a landlord is entitled to forfeit the tenancy for non-payment of rent.

The tenancy agreement usually has a forfeiture clause which states that, if at any time rent is unpaid a landlord can re-enter and take possession of the property. Although the clause states that you may re-enter the property and take possession, in fact you must obtain a court order for possession because the property is being used for residential purposes. By re-entry the landlord forfeits the tenancy.

However, you have the right to treat the tenancy at an end and seek possession on the basis of forfeiture.  You should, however, be aware that it does mean that the tenancy is at an end, i.e., the tenant is no longer liable for future rent until the end of the tenancy agreement, nor are they bound by any of the other terms of the agreement.

This does not mean that the tenant is entitled to occupy the property for free.  You are entitled to claim “damages for use and occupation of the property” which, in practice, means payment of an amount equivalent to the rent on the basis that the tenant is depriving you of the use of the property and your ability to re-let it to someone else. 

Waiver

It is important not to do anything which would be interpreted as waiving your right to forfeiture, for example doing anything inconsistent with the tenancy having come to an end.  Demanding the rent is inconsistent with the tenancy having ended and therefore the demand is treated in law as the landlord accepting the continuation of the tenancy and so the right to forfeiture is lost.  This is an important point as landlords and agents can often get into difficulties on the issue of waiver.  The easiest way of avoiding the problem is to imagine your tenants now occupying the property as trespassers.  They have no legal right to be there (albeit that you need a court order to remove them) and you have no agreement with them.  The only thing you can now demand from them is an amount equivalent to the rent for their continued occupation of the property.

Relief from forfeiture

Although you are entitled to treat the tenancy at an end and bring a claim for forfeiture, tenants can apply for relief from forfeiture.  Relief from forfeiture means that the tenancy is treated as having continued on its original terms.  Specifically, if the tenant pays all the arrears and costs not less than 5 days before the court hearing they are automatically entitled to relief from forfeiture and the claim ceases. 

Similarly, a court must give a minimum of 4 weeks for the tenant to pay the arrears and costs after the court hearing and, if they do, they are entitled to relief from forfeiture.  The court has the power to extend that period on the application of the tenant and there is a long stop provision allowing tenants to apply for relief from forfeiture for 6 months after the landlord recovers possession.  This does not mean that you cannot re-let the property for 6 months as the courts do not expect landlords to leave properties empty for that period on the off chance that the tenant may apply for relief. 

You are entitled to act reasonably in re-letting the property and when considering whether it is reasonable to grant relief from forfeiture the court would take into account whether there are new tenants in the property.  I would also point out that relief from forfeiture will always be on the basis that any arrears and costs are paid so you would not be out of pocket.

Action steps

Forfeiture is a very complicated and outdated area of law. It is important to understand the effect of forfeiture as it has a significant impact on both the landlord and tenant. 

If any applicable tenancies do fall into rent arrears, then take immediate action:

1 – Consult a solicitor if a tenant falls into rent arrears as you do not need to wait until there are 2 months’ rent outstanding like usual AST tenancies.

2 – Once a solicitor has been instructed then the safest thing to do is do nothing! Forfeiture is possibly the only procedure where the advice is for landlords/agents to do nothing. With forfeiture there is a very fine line that can be crossed which could jeopardise court proceedings. Therefore agents/landlords should immediately cease any action that recognises the existence of the tenancy to prevent any issues with waiver and so any court proceedings are not affected.

3 – It is recommended to cease communications with the tenant and leave this with the solicitor to communicate with the tenant on your behalf. The solicitor will review the tenancy including the forfeiture clause and assess whether the tenancy can be terminated at that point.

Woodstock’s specialist lawyers can assist with terminating all types of tenancies. If you are unsure what is the correct procedure for a type of tenancy, then please do not hesitate to get in touch and we can help. Woodstock are on hand to guide you through the process and also communicate with the tenant on your behalf if required to help recover possession of the property as quickly as possible.