Waiver of the right to forfeit

Waiving the right to forfeit can be seriously detrimental for landlords but is an area that few really understand and which can present a minefield of accidental waivers that create alarming exposure. We have been looking at situations in which the right to forfeit can be waived and how to avoid these where possible.

Waiving the right to forfeit has a different effect depending on the breach in question – waiving a continuing breach has less of a consequence, as the right to forfeit can arise again the next day even after the breach is waived; whereas waving a ‘once and for all’ breach means there will be no other occasion on which the right to forfeit arises.

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The right to forfeit

As a result, until it is clear what type of breach is concerned, where a right to forfeit is potentially being waived, it is usually best to err on the side of caution and to preserve the right to forfeit. However, this is not as straightforward as it sounds, as what is required, is that landlords (or their representatives) do or say nothing that unequivocally recognises the continued existence of the lease in the face of the breach. The test is objective and has nothing to do with the intentions of the landlord.

Unfortunately, waiving the right to forfeit can arise even where this was not the intention or where there was another motivation for the action in question.

Demanding rent that is due in advance, for example, will usually waive the right to forfeit, even if done without prejudice (unless the tenant does not receive the rent demand).

Accepting rent after the landlord becomes aware of a breach will also waive the right to forfeit, even if the rent is accepted by an agent or bank against specific instructions given by the landlord (unless the money is returned straight away). It is worth noting, however, that the courts will generally accept a landlord’s right to accept monies that became due before the landlord became aware of the breach.

Levying distress will waive the right to forfeit, as there is a requirement that there must be a subsisting landlord and tenant relationship for there to be a right to distrain.

Negotiations can also have the effect of waiving the right to forfeit where those negotiations relate to the breach – for example where a subtenant takes up occupation before permission has been granted. Discussions about surrendering a lease because of a breach, as well as arrangements to inspect premises should all be carried out without prejudice to the landlord’s rights to avoid waiving of the right to forfeit arising.

Making a claim under the lease or applying for an injunction will waive the landlord’s right to forfeit, as will making a statutory demand for rent due if made after a landlord has become aware of a tenant breach.

Given the wide range of situations outlined above where a right to forfeit may be accidentally waived, how can this situation be avoided? The best approach is to cease all contact whatsoever with the tenant or their representatives or, at the very least, ensure that any contact is on a ‘without prejudice’ basis (but remember this is not always effective). A landlord must also avoid accepting any rent or other sums due under the lease in order to preserve the right to forfeit until such time as a decision is made about the breach.

Avoiding waiving the right to forfeit is not an easy path to tread but taking care in this way can avoid a very difficult and costly situation arising for a landlord in the future.

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