Q&As

If a commercial tenant owes substantial rent arrears and has been made bankrupt, is it better to forfeit on the basis of non-payment of rent or insolvency (both give rise to the right to forfeit under the terms of the lease)?

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Published on LexisPSL on 28/10/2019

The following Property Disputes Q&A provides comprehensive and up to date legal information covering:

  • If a commercial tenant owes substantial rent arrears and has been made bankrupt, is it better to forfeit on the basis of non-payment of rent or insolvency (both give rise to the right to forfeit under the terms of the lease)?

We assume that the right to forfeit in respect of the rent arrears and/or the bankruptcy has not been waived—see Practice Note: Forfeiture of a lease, in particular section: Waiver.

Whether to rely on one (and, in which case, which one) or both grounds to forfeit will depend on various tactical considerations, including:

  1. if the landlord simply relies on the arrears in order to forfeit, they will not need to serve a notice under section 146 of the Law of Property Act 1925 (LPA 1925), and they can proceed straight to peaceable re-entry (or court proceedings if preferable). Note that the court has interpreted the restriction on proceedings and remedies during bankruptcy under section 285(3) of the Insolvency Act 1986 so that forfeiture by re-entry and by court proceedings falls outside the sect

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