Q&As

Can a landlord proceed to forfeit a commercial lease on the basis that a bankruptcy order has been made knowing that the application for annulment (the grounds being that the petition was not served) is due to be made where there are no other forfeiture grounds? If the lease is forfeited and a new lease granted to a new tenant regardless of the proposed application for annulment will any annulment of the order have any effect on the newly granted lease?

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Produced in partnership with Kate Andrews of Hamlins
Published on LexisPSL on 28/03/2017

The following Property Q&A produced in partnership with Kate Andrews of Hamlins provides comprehensive and up to date legal information covering:

  • Can a landlord proceed to forfeit a commercial lease on the basis that a bankruptcy order has been made knowing that the application for annulment (the grounds being that the petition was not served) is due to be made where there are no other forfeiture grounds? If the lease is forfeited and a new lease granted to a new tenant regardless of the proposed application for annulment will any annulment of the order have any effect on the newly granted lease?
  • Granting a lease to a third party

For the purposes of this Q&A we have assumed that there is no ground to forfeit as a result of non-payment of rent.

The first point to consider is whether the landlord has grounds to forfeit the lease (ie whether the right has arisen).

Unless there is a breach of a condition of the lease (normally failure to pay rent will be breach of a condition, but the facts of any situation may vary), the right to forfeit must be specifically reserved in the lease. Bankruptcy as a form of insolvency does not generally prevent an action in forfeiture in the way of, for example, administration. Further, if so reserved in the lease a tenant’s bankruptcy may itself be a ground to forfeit.

Tenant insolvency is an irremediable breach but also a once-and-for-all breach meaning the right to forfeit because of a tenant’s bankruptcy can be easily lost. It therefore needs careful management.

Normally a notice in accordance with section 146 of the Law of Property Act 1925 (LPA 1925) needs to be served on the tenant prior to forfeiture. However, this might not be necessary (for example, no such notice is needed for breach of covenant to pay rent (LPA 1925, s 146(11)). If there is any doubt as to whethe

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