Waiving the right to forfeit

In our first article of this series we considered what forfeiture is and why a landlord may insist that the right is provided for in the lease. However, even if there is a right to forfeit outlined in the lease, it is all too easy to waive the right to forfeit in practice. In this article ‘Waiving the right to forfeit’, we will be looking at how a landlord may waive their right, the consequences of waiver and how they might go about avoiding it.

How does a landlord waive their right to forfeit?

There are a variety of ways that a landlord may waive their right to forfeit. However, a landlord will waive their right to forfeit if:

1. They have knowledge of the tenant’s breach;
2. They unequivocally acknowledge the existence of the lease; and
3. Communicate said recognition to the tenant.

Whilst these provisions seem relatively straight forward, it is important that landlords understand what these mean in practice.

1. Knowledge of the breach        

Firstly, to have waived the right to forfeit the landlord must have had knowledge of the tenant’s breach. Knowledge is not confined to the landlord themselves, there have been occasions where if the landlord’s employee^[1] or agent ^[2]  have knowledge of the breach then this has been held to waive their right to forfeit. This is known as imputed knowledge.

Further, mere suspicion does not amount to a breach. This means that should the tenant deny a breach of lease, and the landlord believes them then the right to forfeit will likely not have been waived. However, if the landlord has more than a suspicion that there has been a breach and instead has reasonable grounds to suspect that the tenant is in breach of the lease then this may be considered knowledge. ^[3]

• Unequivocal acknowledgment of the lease

Armed with knowledge of the breach, if a landlord recognises the lease as continuing they will be on the path to waiving the right to forfeit for the breach. Some of the most common examples of acknowledging the lease as continuing are serving 25 notice and accepting or demanding rent. However, it can even be as simple as discussing matters relating to the lease with the tenant.

• Communicating that recognition to the tenant

Finally, in order for the breach to be waived, the landlord needs to have communicated to the tenant that the lease, despite the tenant’s breach, is continuing. This is implicit in most cases during the course of the acknowledgment, for example if the landlord demands rent or serves a notice on the tenant then they will have both acknowledged the continuation of the lease and communicated that to the tenant. In such a case, the right to forfeit will be waived.

In most cases, once the right to forfeit has been waived it has been waived forever. However, there are different types of breach, and so in some cases the right to forfeit may arise again on the re-occurrence of the breach. It is going to depend on the type of breach.

Continuing v ‘Once and for all’ breaches

A continuing breach is a one which will start afresh each day, the fact that you waived the breach on one day does not prevent you from forfeiting the next day. Continuing breaches include:

• Breach of a covenant to insure
• Breach of a covenant to keep property in repair
• Breach of a user covenant

Conversely, a ‘once and for all’ breach is one which is lost upon waiver. These include:

• Breach of a covenant to pay rent
• Breach of a covenant against subletting or assigning
• Breach of a covenant to not make alterations

Take-aways

A landlord needs to act fast when they become aware of a breach. They have one of two options that they can make, forfeiture or continuation, this decision should not be made lightly as whichever choice they make will become binding, particularly if it’s a once and for all breach. Practically, a landlord who is concerned that there has been a breach and wants to reserve their right to forfeit should put a rent-stop in place and on confirmation of breach they should make a decision quickly as to whether they are going to exercise forfeiture.

Forfeiture is a complex area and so if you are considering exercising it and need legal advice please get in touch with me directly at eclaffey@prettys.co.uk

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^[1] Metropolitan Properties v Cordery (1980) 39 P & CR 10

^[2] Central Estates

^[3] Van Haarlam v Kasner Charitable Trust (1992) 64 P & CR 214