Ending a Commercial Property Lease by Changing the Locks

Where a landlord of commercial property wishes to end a tenant’s right to possession, they have the options of going to court, or using the self-help remedy of changing the locks.

In this article, I will discuss the process and benefits of forfeiting a lease by changing the locks, also known as peaceable re-entry. I would point out that the decision whether to forfeit is a commercial one and it is not always the case that a landlord would want possession (especially in a poor economic climate).

Changing the locks is often a more attractive alternative for the landlord than going to court, due to the fact that it is generally quicker and more cost effective. However, it is not without potential pitfalls and landlords must be very careful when going down this route.

First, it is imperative to establish that the right to forfeit the lease has actually arisen. Leases often contain clauses that a landlord can only forfeit if rent is a certain number of days overdue. If the landlord is seeking to forfeit the lease for anything other than rent arrears, often it is necessary to serve a notice under Section 146 of the Law of Property Act 1925. The purpose of the Section 146 Notice is to give the tenant the opportunity to remedy the breach.

One of the most important pitfalls to be wary of with forfeiture is to ensure that the right to forfeiture has not been waived. The right can be waived where the landlord has knowledge of the tenant’s breach, performs an act which recognises the lease as continuing and communicates this act to the tenant. Examples can include accepting and demanding rent.

Once the landlord has established that the right to forfeiture has arisen (and has not been waived), there are a number of procedural restrictions and it is important that these are complied with. In particular, it is important to note an offence will be committed if violence is used when there is a person at the premises who opposes the forfeiture.

Therefore, it is prudent to instruct certified bailiffs to carry out the forfeiture, although the landlord is ultimately responsible if the forfeiture is not carried out properly. Following forfeiture, a notice should be displayed on the property indicating that the forfeiture has been carried out.

Landlords should be aware that tenants have the option of applying for relief from forfeiture which is a discretionary remedy available to tenants. It has the effect of operating to put the parties back into the position they would have been in had the forfeiture not taken place. It is very important to consider at the outset the tenant’s potential to apply for relief.

In addition to a claim for relief from forfeiture, a tenant will also a have a claim for wrongful forfeiture if the right to forfeit did not exist when the forfeiture took place. This can leave the landlord open to a claim for damages and is very much to be avoided.

Consideration needs to be given to the fact that the general position after forfeiture is that the landlord will be responsible for any of the tenant’s goods that remain in the property. This is unless the contrary is provided for in the lease. This can place a burden on the landlord, who would need to establish the goods have been abandoned before they can be sold.

The landlord will be responsible for paying business rates once the forfeiture has taken place on the basis that they are now in possession of the property.

It is very important that legal advice is taken about forfeiture as it is a complicated and technical area.

Paul Davis is an Associate Solicitor at BHW Solicitors in Leicester and regularly writes and advises on all aspects of debt recovery and commercial litigation. Paul can be contacted on 0116 281 6231 or email paul.davis@bhwsolicitors.com.