Forfeiture, break notices and termination

A break clause is the most dangerous provision in a commercial lease, because the consequence of getting it slightly wrong is being liable for the whole remaining term.

[ If a break date is approaching, telephone: 0207 112 8818 ]

Break notices — where they fail

The courts construe break provisions strictly, and a tenant who substantially complies has not complied. Failures cluster in five places.

The notice itself. Form, content, who serves it, who it is served on, and how. Where the lease prescribes a method of service, that method must be used. Serving on the landlord’s agent when the lease requires service on the landlord, or by email where the lease requires post, can be fatal.

Timing. The notice period is calculated precisely and there is no discretion. A notice served a day late does not operate.

Vacant possession, where the break is conditional on it. This defeats more breaks than anything else. Leaving fixtures, furniture, partitioning, a security system, or even keys with an agent can be enough to argue that vacant possession was not given. The requirement is exacting.

Payment conditions. Where the break is conditional on all rent being paid, “all rent” means all rent — including sums falling due on a quarter day that spans the break date, and frequently including sums the tenant does not think of as rent. Underpaying by a small amount defeats the break entirely.

Other conditions, such as compliance with covenants. A condition of full compliance with all covenants is almost impossible to satisfy and is one of the harshest provisions a tenant can accept.

There is no relief from a failed break. Unlike forfeiture, there is no equitable jurisdiction to put things right. It simply does not operate, and the lease continues.

If you have a break date coming, take advice months ahead — not when the notice is due, and certainly not afterwards.

Forfeiture

The landlord’s right to bring the lease to an end for breach.

For rent arrears, forfeiture can often be exercised by peaceable re-entry — changing the locks — without a court order, provided it is done lawfully and the premises are not residential. It is a powerful remedy and one that can be exercised very quickly.

For other breaches, a statutory notice must usually be served first, specifying the breach, requiring it to be remedied if it is capable of remedy, and requiring compensation. The tenant must be given a reasonable time to comply.

Waiver is the landlord’s main risk. Doing anything that recognises the continued existence of the lease — most obviously demanding or accepting rent — with knowledge of the breach waives the right to forfeit for it. This happens accidentally and constantly, usually through an agent’s automated rent demand.

Relief from forfeiture. The tenant can apply to the court to be restored, and relief is commonly granted where the breach is remedied and the landlord compensated. A landlord who forfeits should expect an application, and a tenant who has been locked out should make one promptly — delay damages the prospects.

Other routes to termination

Surrender, by agreement or by operation of law, where both parties act in a way inconsistent with the lease continuing.

Expiry, subject to security of tenure under the 1954 Act where it applies.

Disclaimer on insolvency, which has consequences for guarantors and former tenants that are frequently overlooked.

What we do

For tenants: reviewing break provisions well before the date, drafting and serving notices, advising on what vacant possession actually requires in your premises, and checking payment conditions against the rent account. Applying for relief from forfeiture urgently where you have been locked out.

For landlords: advising on whether forfeiture is the right remedy or a destructive one, serving notices correctly, avoiding waiver, and responding to relief applications.

What it costs

£400 per hour plus VAT with an estimate by stage.

A break clause review is a fixed fee and should be done months before the break date. Against the cost of a failed break — which is the rent for the remainder of the term — it is the cheapest insurance in commercial property.

Urgent relief from forfeiture work is hourly, and if you have been locked out, telephone rather than email.

Questions

Questions people ask us

I served my break notice. Am I safe?

Not necessarily. The notice is only part of it. If the break is conditional on vacant possession or on payment of all rent, those conditions have to be satisfied precisely at the break date. Have it checked before the date, not after.

What counts as vacant possession?

More than most tenants assume. Fixtures, partitioning, furniture, equipment and sometimes even keys held by an agent have all featured in disputes. The requirement is exacting and it is where most breaks fail.

I underpaid the rent by a few hundred pounds. Does that matter?

If the break is conditional on payment of all rent, potentially yes — entirely. These conditions are construed strictly and there is no relief from a failed break.

My landlord has changed the locks. What do I do?

Act today. Apply for relief from forfeiture promptly — relief is commonly granted where the breach is remedied, but delay damages the prospects. Telephone rather than email.

I accepted rent after the breach. Have I lost the right to forfeit?

Possibly, for that breach. Demanding or accepting rent with knowledge of a breach usually waives the right to forfeit for it. Continuing breaches are treated differently from one-off ones.

The hub

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Lease renewal and the Landlord and Tenant Act 1954 →

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