Leasehold Property: Ninety-Nine Problems With Forfeiture But Waiver Needn’t Be One

Forfeiture can be a difficult labyrinth to navigate. One aspect that often proves problematic is ensuring that any right to forfeit a lease arising from a breach of the lease is not waived by the landlord. Given the numerous ways that such a right can be waived it is possible to do so inadvertently, which in turn can have a significant impact on the landlord.

The impact of waiving a right to forfeit will have different consequences depending on the nature of the breach. The main types of breach are a continuing breach, such as a breach of covenant of repair, or as they are commonly referred to, a ‘once and for all’ breach, such as non-payment of rent. If the breach in question is continuing, then the effect of waiving the breach will have less of an impact owing to the fact that a further breach will occur each day, however if a ‘once and for all’ breach is waived the consequences can be significant as it will prevent the landlord from forfeiting as a result of that particular breach.

As is always the case, in the event that there has been a breach of the lease the landlord will need to consider their options and decide whether in the circumstances they do in fact wish to forfeit the lease. If they do then it is imperative that the right to forfeit is not waived, particularly in the case of a ‘once and for all’ breach. Moreover, in the interim the right to forfeit should be preserved.

There are numerous ways in which a right to forfeit may be waived, the most common of which are set out below. The inability of the landlord to carry out any of the functions set out, will of course be factors the landlord should take into account when deciding whether they wish to forfeit the lease in the first instance.

Proceedings – were the landlord to make a claim under the lease for something other than forfeiture flowing from the breach in question, or apply for an injunction, they will waive their right to forfeit.

Demanding rent – if a demand for rent due in advance is received by the tenant this will usually waive any right to forfeit, even if attempts are made to do so on a without prejudice basis.

Accepting rent – if a rental payment is accepted by the landlord (or an agent/bank on their behalf) after the landlord has become aware of the breach this will amount to a waiver of the right to forfeit. That is also the case where the rent is accepted contrary to specific instructions by the landlord. In the event that a rental payment is offered by the tenant, it should be refused. It is important that banks/agents are instructed not to accept any such payments. As a last resort all such bank accounts should be monitored continuously to ensure any payments are immediately recognised and returned, however this will leave open the question as to whether the payment has been accepted and thus the waiver has occurred.

Notices – If a landlord serves on the tenant a statutory notice or notice under the lease, save for the purposes of seeking forfeiture as a result of the breach in question, they are deemed to be acting in accordance with the terms of the lease and as such may be deemed to have waived any right to forfeit arising from a breach by the tenant.

Inspection – Should a landlord seek to arrange to inspect the premises, they are again acting in accordance with the terms of the lease and may be deemed to have waived the right to forfeit. The landlord should therefore ensure not to arrange any such inspection.

Negotiating – If a landlord were to enter into negotiations with the tenant in relation to the breach the landlord could be said to have waived the breach. In the event that negotiations in relation to a potential surrender of the lease, for example, are to be carried out, they should be on a without prejudice basis, with a view to minimising, but not eliminating, the risk of them waiving the right to forfeit.

Guidance

Given the myriad of ways a right to forfeit may be waived, including often unintentionally, every effort should be make to avoid such a scenario. The simplest approach to avoiding an accidental waiver is to simply not communicate with the tenant in any way whatsoever (including instructing any agents/banks not do so, nor accept any payments). If contact is unavoidable then it must be made clear that any such contact is on a without prejudice basis, however this does not always avoid the potential for the breach being waived.