End of the line for Forfeiture?

On 20 January 2004 the Law Commission published its consultation paper relating to the termination of commercial tenancies; and has invited interested parties (i.e. landlords, agents, bailiffs etc) to respond by 30 April 2004. Its proposals will end the law of forfeiture as we know it. Common law forfeiture will cease to exist and will be replaced by a new statutory system.

The main proposal to affect commercial landlords, is that when a tenant is in default the landlord would be able to seek the termination of the tenancy by applying to the court for a termination order; or by physically re-entering if the tenant failed to comply with a written notice requiring remedial action. The difference from before, is that neither commencement of legal proceedings, nor the act of re-entry would result in the lease determining – as at present. A further requirement would be that the landlord must serve the tenant a notice of his intention unilaterally to recover possession by physical re-entry.

Note that this unilateral right to recover possession does NOT result in the lease determining. Further, it cannot be used for tenancies with more than 25 years unexpired or where the tenant is insolvent.

Following the repossession there will be a one month period during which the tenant can apply for relief. The tenancy will terminate automatically at the end of that month if there is no outstanding application for relief. During this period the tenant will be obliged to perform his obligations under the tenancy as before. The same rules will apply for “abandoned” premises.

Comment

The proposals will certainly remove some of the complexities that relate to this area - the doctrine of waiver, for example.

However, the introduction of a “notice” procedure in cases of simple rent arrears will hugely curtail the usefulness of the remedy. Unscrupulous tenants will be forewarned and easily able to frustrate a landlords attempts unilaterally to recover possession; for example by occupying the premises 24 hours a day. Even if the landlord does go through the courts, the tenant could mount spurious challenges to the pre-action notice.

The suspicion remains that, in practice, the only thing which will be achieved if the proposals pass into Law is that a quick and efficient remedy for landlords will have been removed.

The full report may be seen at www.lawcom.gov.uk/docs/cp174.pdf where you can also register your comments on the proposal.

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