Relief against forfeiture of a commercial lease – a tenant’s second chance

What is relief against forfeiture?

Relief against forfeiture (as it applies to leases) is where a lease has been forfeited and the landlord has re-entered the leased premises, due to a tenant’s breach (or contravention) of a term of the lease, but a Court makes orders that reinstate the lease and enable the tenant to return to the occupation of the premises.

Relief against forfeiture is not dependent upon any error or failure on the part of the landlord to properly act.  The landlord may act completely in accordance with the lease and the landlord's contractual rights to forfeit the lease and re-enter the premises, but the tenant may nevertheless be granted relief against forfeiture.

The principle is based on notions of fairness and equity, providing for the reinstatement of a lease notwithstanding the landlord’s strict contractual rights, where the enforcement of such rights would be unfair.  When asking the Court for such relief, the tenant will generally need to put the landlord back in the same position it would have been in had the breaches committed by the tenant not occurred.

How does it work?

Assuming a landlord has forfeited a lease and re-entered premises on a valid legal basis, the tenant may either:

 

  • accept that it has lost the right to occupy the premises under its lease; or 

 

 

  • consider commencing legal action seeking relief against forfeiture.   The tenant potentially has this option even where the tenant is in serious breach of the lease.

 

If the tenant does commence court proceedings, the tenant will be faced with the task of convincing a Judge that it would be equitable, or fair, to let the tenant back into the premises despite the tenant's previous breach of the lease

As mentioned above, assuming the landlord has validly re-entered, then, amongst other things, the tenant will need to satisfy the Court that it will remedy the breaches (for example, paying outstanding rent) and will not again commit a breach. 

The nature of the relief sought usually requires that any Court action be taken by the tenant quickly, as the landlord may be seeking new tenants, and any delay or new lease agreement with a new tenant may prevent the possibility of relief being granted.

The Court has the discretion of whether to grant relief against forfeiture.  Some of the matters the Court will commonly take into account in deciding whether or not to grant relief include:

  1. The nature and seriousness of the breach.
  2. Whether the tenant has, or will, compensate the landlord for the breach.
  3. The nature and extent of any loss that will be suffered by the tenant by reason of the forfeiture.
  4. Whether or not there is a history of the tenant breaching the lease or was there just one isolated incident of the breach.
  5. Whether the breach was committed deliberately or inadvertently.
  6. The likelihood of the tenant committing a further breach.
  7. Whether the premises have been re-let to a new tenant before the tenant commences court proceedings.

For more advice on this topic, chat with our experienced lawyers today.

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