Ending a commercial lease
As a commercial mortgage holder / landlord, chances are that, eventually, you will need to end the lease early and evict your tenant. If your tenant is in breach of the lease terms, you may have the right to summarily terminate the tenancy – this is known as ‘forfeiture’.
What to do about non paying commercial tenants
The most typical breach of a commercial lease is non-payment of rent; however, it is common to find lease terms that allow for forfeiture due to abandonment, any form of insolvency, using the premises for an illegal or unauthorised purpose or breaching or failing to comply with any other terms of the lease. You can only forfeit a tenancy if the lease contains a forfeiture clause.
The safest way to evict a commercial tenant is by commencing a possession claim in the County Court; however, if it is acceptable to do so, it can sometimes be cheaper and simpler to exercise ‘peaceable re-entry’.
Commercial tenant eviction through peaceable re-entry
Peaceable re-entry entails physically entering the premises yourself (or hiring bailiffs to do so) and changing the locks so that your tenant cannot re-enter the property. You should take great care if going down this route; if the forfeiture is found to be unlawful, exercising peaceable re-entry could constitute trespassing.
Breaches other than default on rental payments will generally require that you serve notice as stipulated in section 146 of the Law of Property Act 1925: ‘Restrictions on and relief against forfeiture of leases and underleases’.
Protection from eviction is the property mixed use?
Under section 2 of the Protection from Eviction Act 1977 – ‘Restriction on re-entry without due process of law’ – it is illegal to evict a tenant by any means other than a court order where all or part of the property is lawfully occupied by a residential tenant. This extends to mixed-use property, such as a flat above a shop.
Therefore, you will be unable to forfeit the lease on a mixed-use property by exercising re-entry unless the residential element of the premises is unoccupied at the time of forfeiture.
How to exercise peaceable re-entry
Provided that any required notice has been served and the prescribed time frame for your tenant to remedy the breach of lease has passed without adequate action, you can seek to re-enter your property.
Firstly, check that no-one is present who is likely to oppose re-entry to the property. If violence or the threat of violence is in any way likely, then you run the risk of committing an offence under section 6 of the Criminal Law Act 1977: ‘Violence for securing entry’.
If you are satisfied that you can in fact enter ‘peaceably’, as the term suggests, you can physically enter the property and change the locks. Changing the locks is a clear and unambiguous signal to your tenant that you have terminated the lease. You will also need to leave a notice in a prominent location that is visible to your tenant – e.g. on the main entrance to the property – stating:
- That you, the landlord, have forfeited the lease by peaceable re-entry, and that you have changed the locks
- The date of re-entry
- The reason for re-entry (generally non-payment of rent)
- That, as of the date of re-entry, the lease is considered to be at an end
Many landlords prefer to hire bailiffs to exercise peaceable re-entry. A reputable bailiff firm will use professional locksmiths, they will know how to post the correct notices on the premises, and they will deal with any goods the tenant might have left on-site. This is the safest way to avoid being accused of breaking the law, as professional bailiffs will not enter a property unless it is legal to do so.
Terminating a commercial lease by court order
If you cannot exercise peaceable re-entry or would prefer to go the longer but safer route, you can apply to your local County Court for a possession order. Use the government’s online court and tribunal finder to find the County Court nearest to the property. The Court will set a hearing date, at which point your tenant has 14 days to file a defence against your claim or apply for relief from forfeiture.
Relief from forfeiture
Your tenant may be able to apply from relief from forfeiture. This will afford them the option to remedy any breaches of the lease, including repayment of all rent arrears and costs (including bailiffs and/or locksmiths fees, if you have exercised peaceable re-entry).
Once a possession order is granted, your tenant will usually have 28 days to either apply for relief or, if they are unable or unwilling to meet the relief conditions imposed by the Court, vacate the premises. At this point, you will have full possession of the property. However, bear in mind that market conditions or the state of the property might make it difficult to re-let the property immediately. As full business rates will usually become payable on an empty property after three months, you should ask yourself before evicting your commercial tenant if it is the wisest course of action to take.
If you own a commercial property you can talk to us to discuss commercial mrtgage options today.