Forfeiting a Mixed-Use Lease

Different rules apply when forfeiting commercial leases and when forfeiting leases for a property which is in mixed use (i.e. part commercial, part residential).

Generally, in the case of a commercial lease where the tenant has accrued rent arrears, the landlord has the right to peaceful-re-entry. The terms of the commercial lease will usually have provisions regarding forfeiture and will refer to a landlord’s right to re-enter should there be a default in payment of the rent which lasts beyond a stated period. Provided such a clause exists in the lease and can be relied upon, the landlord can re-enter the property and forfeit the lease without issuing court proceedings. However, this is not the case for mixed-use premises.

For mixed-use leases, where the premises are used for both commercial and residential purposes, the landlord needs to obtain an order for possession in order to seek eviction of the tenant because part of the premises is “let as a dwelling”.

Section 2 of the Protection from Eviction Act 1977, states:

2              Restriction on re-entry without due process of law

Where any premises are let as a dwelling on a lease which is subject to a right of re-entry or forfeiture it shall not be lawful to enforce that right otherwise than by proceedings in the court while any person is lawfully residing in the premises or part of them.

Where Section 2 of the Act applies, any landlord taking action to repossess the commercial ‘part’ of mixed-use premises without a court order may be acting illegally.

The Court of Appeal recently examined a situation (see Pirabakaran v Patel [2006] EWCA Civ 685; [2006] 36 EG 260) where a landlord allowed its tenant to remain in the residential flat above the shop (while they issued a claim for possession) but forfeited the lease to the commercial part of the premises by entering and changing the locks to the shop.  It was concluded that “let as a dwelling” in reference to s2 of the Protection from Eviction Act 1977 means “let wholly or partly as a dwelling”.

In such cases, the correct procedure would be to issue legal proceedings for possession and, if necessary to enforce the order either using the County Court bailiffs or (upon the express permission of the County Court) using High Court Enforcement Officers.

For more information regarding enforcement of possession orders or on forfeiture of commercial leases please contact us on 0330 900 8000.