Termination of Tenancies for Tenant Default - Law Commission

PART 1
INTRODUCTION
REFORMING THE LAW OF FORFEITURE
1.1 The law of forfeiture currently dictates how and when a landlord may terminate a
tenancy as a result of a breach of covenant or condition by the tenant. 1 It is of
particular importance where the tenancy comprises a fixed term (such as twelve
months, five years or 999 years) as it is often the only means by which the
landlord may respond to breaches of covenant by removing the tenant and
recovering possession.
1.2 Although the law of forfeiture applies to commercial, agricultural and residential
tenancies, its principal significance relates to tenancies of commercial premises
and to “long” residential tenancies (that is, tenancies granted for a fixed term of at
least 21 years). This is because agricultural premises tend to be let on periodic
tenancies (for example “from year to year”) which are terminable by notice and in
the remainder of the residential sector the law of forfeiture is rendered largely
redundant by the statutory codes of security prevalent there.
1.3 The law of forfeiture is in urgent need of reform. As we stated in our Consultation
Paper: 2 “it is complex, it lacks coherence, and it can lead to injustice”. 3 The time
has come for its abolition and its replacement by a simpler, more coherent
statutory scheme based on what is appropriate and proportionate in the
circumstances.
1.4 This Report sets out, in the form of a draft Bill, a new statutory scheme for the
termination of tenancies by landlords following a breach of covenant by the
tenant. Removing the need for tenancy agreements to contain express rights of
re-entry or forfeiture clauses, it introduces a new concept of “tenant default” to
define the circumstances in which a landlord may seek to terminate the tenancy
before the end of its term. It requires the landlord in all cases to warn the tenant
of the impending action by giving a written notice. It confers enhanced protection
on those with interests deriving out of the tenancy (principally mortgagees and
sub-tenants) by giving them the right to be served with relevant notices at the
same time as the tenant and by allowing them to apply to court for orders
protecting their interests in the property.
1.5 We summarise the operation of our recommended scheme in Part 2. Although it
is predominantly a court-based system, it is wrong to assume that matters will
always, or even usually, end up in court. A major objective of the
recommendations made in this Report is to facilitate an exchange of information
at an early stage of the process and to promote negotiation and compromise,
1 See discussion of covenants and conditions in para 3.10 and following. In the Report, the
term “covenant” includes “condition” save where the context otherwise requires.
2
Termination of Tenancies for Tenant Default (2004) Law Commission Consultation Paper
No 174 (hereafter “CP”).
3 CP, para 1.1.
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