Forfeiture: when is it safe to accept or demand rent?

When a tenant is in breach if its lease, for example by failing to pay rent or breaching a tenant covenant, the landlord is usually entitled to forfeit (terminate) the lease. Once a breach has taken place, and the right to forfeit has arisen, the landlord must take care not to waive (give up) that right.

Typically waiver occurs where a landlord accepts or demands rent from its tenant. This is seen as the landlord making a choice to treat the lease as continuing; the right to forfeit has been waived. Landlords are, sensibly, very nervous of accepting or demanding any rent from their tenants as soon as forfeiture becomes an option.

However, the recent Court of Appeal decision Faiz v Burnley BC [2021] EWCA Civ 55 has provided further clarification on what rent can be accepted and when waiver will occur. Demanding or accepting rent which accrued and was due prior to the breach will not amount to waiver, even if the landlord had knowledge of the breach when it demanded payment. However, if the landlord has knowledge of the breach and it accepts rent which fell due after the date of the breach, even if the landlord did not know of the breach on the date when the rent in question fell due, this will amount to a waiver. Between the breach occurring and the date of the landlord’s knowledge, rent should not be accepted therefore.

In Faiz v Burnley BC the landlord re-issued a rent invoice after it had knowledge of the breach, the revised (reduced) invoice demanding payment of rent only up to the date on which the landlord became aware of the breach, not for the period thereafter. This was held not to amount to a waiver because it was not a fresh invoice but rather a revised invoice.

This decision provides useful guidance to landlord who may be unsure whether to accept or demand rent from tenants where they are considering forfeiture. Many landlords have been faced with significant rent arrears due to the pandemic and, although the available enforcement methods have been restricted, forfeiture (other than for non-payment of rent) remains possible. This decision provides welcome clarification on how to approach demands and acceptance of rent.

However, the case also shows the fine balance between what amounts to waiver and what does not. This is a tricky area to navigate and specific legal advice should always be sought.

If you require our advice or assistance in relation to the above please do not hesitate to contact our Property Disputes Team by email or by calling 01603 610911 who can advise and assist you throughout this process.

Note: the contents of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any particular circumstance.