Waiver by the landlord of right to forfeit a tenant’s lease

Landlords usually have an express right to forfeit a tenant’s lease in the event of certain specified breaches of the tenant obligations contained in the lease, such as non-payment of rent or disrepair.

A right to forfeit the tenant’s lease (subject to any right the tenant may have to seek relief) entitles the landlord to take back possession of the property (either by changing the locks or issue of possession proceedings) and to treat the lease as having come to an end.

However, the ability of the landlord to forfeit a lease is made more complex by the law in relation to waiver.

In circumstances where there has been a breach of the lease that entitles a landlord to forfeit, the landlord must elect whether or not to treat the lease as at an end or to treat the lease as continuing regardless of the breach.

If the landlord, by his conduct, treats the tenant’s lease as continuing, the landlord can lose his right to forfeit the lease.  Such act is known as “waiver” (a decision or apparent decision by the landlord to treat the lease as continuing).

In order for waiver to prevent forfeiture there must be all of the following:

1. Knowledge of the breach; AND
2. Unequivocal recognition of the continuation of the lease; AND
3. Communication of unequivocal recognition to the tenant

1. Knowledge

The landlord must know of the breach.  The landlord needs to know the basic facts which in law amount to a breach of covenant.  If there are reasonable grounds to suspect a breach the landlord must take steps to establish the true position.  If he fails to do so it will be assumed he had the appropriate knowledge.   Knowledge acquired by a landlord’s employee or agent may be sufficient to waive the right to forfeit subject to the extent of their authority.

The burden of proving that the landlord had knowledge of the breach and has therefore waived the right to forfeit sits with the tenant.

2. Unequivocal recognition of the continuation of the tenant’s lease

The test is an objective one.  If the landlord by his words OR actions shows to the tenant, by an unequivocal act, a concluded decision to elect to treat the tenant’s lease as continuing then the landlord will have, by his words or actions automatically waived his right to forfeit the lease.

When deciding whether the act relied on by the tenant amounts to waiver the court “must consider objectively whether in all the circumstances the act relied on as constituting waiver is so unequivocal that when considered objectively it could only be regarded as being consistent with the lease continuing” Greenwood Reversions Ltd v World Entertainment Foundation Ltd [2008].

Examples of conduct amounting to waiver include demanding or accepting rent, demanding payment of service charges, exercising the Commercial Rent Arrears Recovery procedure, service of a Notice to Quit or a notice to repair and enter and requesting an inspection of the property.

The test for waiver is, however, dependent on all the facts and circumstances of each case.

3. Communication of unequivocal recognition to the tenant 

An act or statement that is not communicated to the tenant is not an election to waive the right to forfeit.  Where the act of waiver relied on is sending a document, for example, the waiver will not be effective unless/until the document is received.  There is no waiver once re-entry is exercised or forfeiture proceedings are issued.

Continuing and Once and for all breaches

Where the tenant’s breach is a “continuing breach”, a fresh right to forfeit will accrue each day the breach continues and any waiver will only effect the breach carried out prior to the date of waiver.

However, where the breach is a “once and for all breach” the right to forfeit for that breach will be lost if waived.

Examples of types of tenant lease breaches

Continuing breach (right to forfeit continues):

• Failure to keep in repair
• Sharing possession
• Failure to insure
• Prohibited user
• Immoral use

Once and for all breach (right to forfeit is lost by waiver):

• Rent arrears (each time)
• Assignment and sub-letting
• Alterations
• Failure to do something by a specific date
• Failure to allow to inspect

Summary

If you have had any communication with your tenant after the date of knowledge of a breach then you are likely to have waived the right to forfeit.  If that breach is a continuing breach then the right to forfeit will arise each day the breach continues but if the breach is a once and for all breach you will have lost your right to forfeit in respect of that breach for good.  It should be remembered however that an act which waives the right to forfeit does not waive the breach itself and other legal remedies should still be available to the landlord such as debt action, claims for damages, specific performance and injunctions.

A handy checklist has been produced to assist landlords in considering whether the right to forfeit has arisen and if so, whether there has been any potential waiver of the right to forfeit.

If you need expert legal advice on tenant’s leases, contact our property litigation experts.