Ending a Lease: Forfeiture

Question 1

What is forfeiture?

Answer 1

The legal proprietary right to end the lease before the end of the term because of a breach of covenant. In legal leases, it must be express to be enforceable. For equitable leases, it is implied only for breach of rent covenant.

Question 2

What are the steps the landlord must take to exercise the right to forfeiture?

Answer 2

1. Enforceable right to forfeiture express in lease (or implied);
2. No waiver of forfeiture
3. Procedure followed (s.146 notice / formal demand)
4. Exercise (peaceable re-entry / court order)
5. Tenant has right to relief

Question 3

When will the landlord have been taken to waive the right to forfeiture?

Answer 3

Where the landlord does an unequivocal act recognising the continued existence of the lease, i.e:
* accepting or demanding rent;
* agent demands rent on their behalf;

Question 4

In which cases is waiver permanent?

Answer 4

In the case of non-continuing breaches:
* non-payment of rent;
* subletting

However, it should be noted that each non-payment of rent is treated as a separate breach which the landlord can sue for.

Question 5

In which cases is waiver not permanent?

Answer 5

In cases of continuing breaches, i.e failure to repair. On each day of the lease, any waiver is taken not to exist anymore as the breach continues and landlord has right to forfeit again.

Question 6

What is the procedure for forfeiture for breach of rent covenant?

Answer 6

The landlord must serve a formal demand on the tenant for the rent at the premises within the hours of sunrise and sunset on the day it becomes payable UNLESS

• lease waives this requirement
• 6 months rent in arrears + sufficient assets on premises to satisfy demand

Question 7

What is the procedure for forfeiture for breach of any other covenant?

Answer 7

Serve a s.146 notice on the tenant stating whether the breach is capable of remedy:
* if it is, require remedy within reasonable time;
* if not, give 14 days to consider position.

If there is a breach of repair covenant + lease is for term of over 7 years with 3 years still to run, landlord must in s.146 notice notify tenant of right to counter-notice within 28 days (after which landlord must apply for permission from court for forfeiture).

Question 8

What are the different methods of enforcement of forfeiture?

Answer 8

1. Peaceable re-entry or court order (commercial);
2. Court order (residential).

Question 9

When can the tenant apply for relief from forfeiture (rent covs).

Answer 9

Before Court Order
* Court likely to dismiss app if rent + costs paid into court

After / At Court Order
* Court may continue lease on condition that arrears are paid
* App for relief must be made within 6 months of re-entry

After Peaceable Re-entry
* Rent + costs paid into court and it is just and equitable
* Usually continued unless there are exceptional circumstances (i.e new lessee or non-payment for 22 years).

Question 10

Consequences for a Subtenant: Forfeiture

Answer 10

• If the headlease is forfeited, the sublease is also destroyed; however, the court may vest the headlease in the subtenant on the terms it sees fit (as long as shorter term)
• Tenant can apply for relief before court order or within a reasonable time of re-entry.