Waiver of Forfeiture — Commercial Lease UK

How Waiver of Forfeiture Works

Waiver of forfeiture occurs where a landlord, with knowledge of a breach of covenant giving rise to the right to forfeit, does an unequivocal act treating the lease as continuing. The most common act of waiver is accepting or demanding rent accruing after the date of the breach. But other acts can also constitute waiver: serving a schedule of dilapidations; issuing proceedings for unpaid rent (rather than for possession by forfeiture); granting consent to an assignment or subletting; carrying out repairs under the lease; or any other act that is inconsistent with the landlord's case that the lease has been forfeited or that the landlord wishes to forfeit it. Crucially, the intention behind the act is irrelevant — if the act objectively treats the lease as continuing, it constitutes waiver regardless of whether the landlord intended to waive the right to forfeit.

• Knowledge: waiver requires the landlord (or their agent) to have knowledge of the specific breach — if the landlord does not know of the breach, accepting rent cannot waive the right to forfeit for it
• Accepting rent: the classic act of waiver — accepting rent accruing after the date of the breach waives the right to forfeit for that breach; even tendering then returning a rent cheque may not avoid waiver
• Rent demands: sending an automated rent demand after learning of a breach constitutes waiver — Segal Securities Ltd v Thoseby [1963]; even if the demand was sent by an uninformed employee or automated system
• Other acts: issuing proceedings for rent arrears; granting consent under the lease; serving a repair notice — any act treating the lease as continuing can constitute waiver
• Intention irrelevant: the landlord's intention does not matter — if the act objectively recognises the continuation of the lease, it waives the right to forfeit

Once-and-For-All vs Continuing Breaches

The distinction between once-and-for-all breaches and continuing breaches is critical to understanding the effect of waiver. A once-and-for-all breach is one that occurs at a single moment in time — for example, an unauthorised assignment of the lease, subletting without consent, a change of use without consent, or the carrying out of alterations without a licence to alter. Once the landlord waives the right to forfeit for a once-and-for-all breach, that right is permanently gone — the landlord cannot resurrect it for the same breach. A continuing breach, by contrast, is one that subsists continuously from day to day — for example, failure to repair, keeping a pet in breach of a no-pets covenant, or using the premises for a prohibited purpose. Where the landlord accepts rent and waives the right to forfeit for a continuing breach, the waiver only covers the breach up to the date of the acceptance. The breach continues, and a fresh right to forfeit arises immediately for the continuing breach from that date onwards.

• Once-and-for-all breach: occurs at a single moment (unauthorised assignment; subletting without consent; change of use) — once waived, the right to forfeit for that breach is permanently lost
• Continuing breach: persists day to day (failure to repair; prohibited use; keeping pets in breach of covenant) — waiver covers breach only up to the date of waiver; fresh right to forfeit arises immediately for the continuing breach
• Practical significance: landlords facing a continuing breach (e.g., persistent failure to repair) can accept rent without permanently losing the right to forfeit — but must serve a fresh s.146 notice and forfeit for the continuing breach
• Classification matters: whether a breach is once-and-for-all or continuing depends on the nature of the covenant — take legal advice before accepting any rent after learning of a breach
• Example: an unauthorised subletting is a once-and-for-all breach — once the landlord accepts rent with knowledge of it, the right to forfeit for that subletting is permanently waived

Practical Steps to Avoid Waiver

The practical management of waiver risk is one of the most important aspects of commercial lease dispute management. When a commercial landlord learns of a tenant's breach of covenant, they must immediately take steps to ensure that no act constituting waiver is done. The critical steps are: (1) immediately notify the accounts department and any managing agents that no rent should be demanded or accepted from the tenant in question until further notice; (2) do not carry out any repairs, give any consents, or take any other steps under the lease; (3) if a rent demand has already been sent (before the landlord became aware of the breach), seek legal advice urgently on whether it constitutes waiver; (4) if the tenant tenders rent, do not accept it — return it immediately without cashing any cheque; (5) if acceptance has already occurred accidentally, seek legal advice on whether the right to forfeit has been waived and, if so, whether any fresh breaches have arisen that give rise to a new right to forfeit.

• Act immediately: on learning of a breach, immediately stop all automated rent demands and instruct managing agents not to accept rent — waiver can occur within hours
• Written instruction to accounts: put in writing to the accounts team that no rent demand or payment should be processed for the tenant in question; document the instruction in case of dispute
• Return tendered rent: if the tenant offers rent, return it by recorded delivery without cashing any cheque — retain proof of return; delay risks being treated as acceptance
• No acts under the lease: do not serve inspection notices, carry out repairs, give any consents, or communicate in any way that treats the lease as continuing until legal advice is obtained
• Take urgent legal advice: if waiver may have occurred accidentally (automated demand sent; cheque cashed before instruction), seek urgent legal advice — it may be possible to forfeit for a different or fresh breach

Section 146 Notices and Waiver

Before a commercial landlord can forfeit for a breach of covenant (other than non-payment of rent), a s.146 notice under the Law of Property Act 1925 must be served on the tenant. The s.146 notice specifies the breach, requires it to be remedied (if remediable), and requires the tenant to pay compensation if appropriate. Where a landlord serves a s.146 notice but then, before effecting forfeiture, accepts rent accruing after the date of the notice, the acceptance of rent can waive the s.146 notice itself — not just the original right to forfeit. In that case, the landlord would need to serve a fresh s.146 notice (and wait for the remedy period to expire) before proceeding to forfeit. This is a particular risk where a landlord serves a s.146 notice and then receives a payment from the tenant that is applied to rent rather than to the outstanding breach.

• s.146 LPA 1925 prerequisite: before forfeiting for breach of covenant (other than non-payment of rent), a s.146 notice must be served specifying the breach and requiring remedy
• Waiver of the s.146 notice: accepting rent after serving the s.146 notice but before effecting forfeiture can waive the notice itself — requiring the landlord to start again with a fresh notice
• Non-payment of rent: forfeiture for non-payment of rent does not require a s.146 notice (for commercial leases) — but accepting rent after formal demand extinguishes the arrears and the right to forfeit for that demand
• Remedy period: the s.146 notice must give the tenant a reasonable time to remedy the breach (if remediable) — the notice period and any subsequent acceptance of rent must be carefully managed
• Legal advice essential: the interaction between s.146 notices, waiver, and remedy periods is complex — always instruct specialist commercial property solicitors before proceeding with forfeiture

Scotland and Relief from Forfeiture

In Scotland, commercial leases do not use the forfeiture mechanism — they use irritancy (conventional irritancy under the lease; or legal irritancy for non-payment of rent of 2 years or more). The waiver doctrine in English law has a Scottish equivalent: acceptance of rent after a breach capable of founding irritancy may waive the right to irritate the lease in Scotland, though the position is governed by Scots law and the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. Relief from forfeiture (in England and Wales) is distinct from waiver: where a landlord has effected forfeiture by peaceable re-entry or court order, the tenant can apply to the court for relief from forfeiture under s.146(2) LPA 1925 — the court has an equitable discretion to grant relief, on terms (typically payment of arrears and costs, and remedy of the breach). Relief from forfeiture is not available to sub-tenants for forfeiture of the headlease in all circumstances.

• Scotland — irritancy: no forfeiture; Scottish commercial leases use irritancy; acceptance of rent after breach capable of founding irritancy may be waiver under Scots law
• Law Reform (Misc Provisions) (Scotland) Act 1985: provides some protection for commercial tenants facing irritancy — landlord must give a 'fair and reasonable' opportunity to remedy the breach
• Relief from forfeiture (England/Wales): distinct from waiver — tenant applies to court for relief after forfeiture is effected; s.146(2) LPA 1925; equitable discretion; typically granted on terms
• Sub-tenants: where the head lease is forfeited, sub-tenants can apply for relief from forfeiture directly — under s.146(4) LPA 1925 and s.138 County Courts Act 1984
• Commercial leases: relief from forfeiture is available for all commercial lease breaches including non-payment of rent; courts are generally willing to grant relief on terms where arrears are paid

Frequently asked questions