FORFEITURE OF LEASE

In a leasehold context, ‘forfeiture’ means terminating or bringing a lease to an end. It is a very well established and very powerful landlord’s remedy. The right to forfeit is usually found in all commercial and residential leases. While there is not a great deal of statutory protection against forfeiture in relation to a commercial lease, there is a great deal of protection in relation to a residential lease. It is very rare for a landlord to be successful in forfeiting a residential lease.

The counter to forfeiture of lease is the tenant’s right to apply for relief against forfeiture; in other words the right to apply to the court for an order restoring the lease. The general position is that the court is inclined to allow an application for relief provided the tenant cures his breach of covenant, eg pays any arrears.

Both landlords and tenants need advice in relation to forfeiture of lease. There are a number of factors to be considered. For a landlord timing is very important and in relation to residential leases there are several procedural steps that need to be taken before a forfeiture claim can be made. A tenant in breach of covenant may be able to take steps to frustrate his landlord’s attempt to forfeit the tenant’s lease.

Forfeiture may be a particularly useful remedy for a landlord of an insolvent tenant.