Waiving Goodbye to Breaches of the Lease

Introduction

  • Overview of the principle of waiver of the right to forfeit a commercial lease.

  • Still a significant amount of uncertainty.

So what is waiver?

  • Lease sets out what the tenant must and must not do and the landlord relies on those terms to be able to forfeit the lease if necessary.

  • Landlord can still lose the right to forfeit the lease.

  • Landlord might waive its right to forfeit the lease for that breach either permanently or temporarily.

When does waiver occur?

  • Three requirements:

  • Knowledge of the breach.

  • Performance of an act that recognises continuation of lease

  • Communication of that act to the tenant.

‘Continuing’ and ‘Once and for all’ breaches

  • ‘Continuing’ breaches – breach continues after a landlord waives the right to forfeit the lease.

Breach of user covenant

Illegal or immoral use

  • ‘Once and for all breaches’ – once landlord waives the right to forfeit for that breach then it is waived for good.

To pay rent or other sums

Not to make alterations without consent

Simple examples

  • A Landlord authorises the tenant pursuant to the Lease to use the premises for the sale of food and other household items. The tenant then decides to use the premises to run a restaurant instead in breach of the lease. During a visit the landlord discovers the breach of the user covenant by the tenant and wishes to forfeit the lease. The quarter day of 25 December is just around the corner and the Landlord wants to ensure the rent is paid before taking any action. So the landlord waits and as he expects the December quarter’s rent is paid and the landlord keeps it.

Has the right to forfeit the lease been waived?

  • A large commercial property landlord has a tenant renting out sought after premises. The tenant has failed to pay rent for several quarters and the tenant’s promises to bring matters up to date repeatedly fail to materialise. The tenant failed to pay the September quarter’s rent and the further 21 day grace period set out in the lease passes. There has been no communication from the tenant and no attempt by the landlord to contact the tenant. The landlord has had enough and decides he wants to take steps to forfeit the lease and rent to another well known company tenant who is prepared to pay a higher rent. Over the next week or so the finance department of the commercial landlord efficiently issues a rent demand to the tenant for payment of the forthcoming December quarter day’s rent.

Has the right to forfeit the lease been waived?

Why does waiver matter?

  • Possible unwanted variations to the lease.

  • Possible disastrous consequences for the landlord – injunction, damages and costs.

How to preserve the right to forfeit if a breach occurs

  • Rent stops

  • Clear communication between landlords, any departments they have or their property agents.

  • Don’t communicate directly with tenant and seek advice

  • If communication necessary clearly on ‘without prejudice’ basis only.

Harris-CharalambousHarris Charalambous
Associate
PRINCE EVANS SOLICITORS LLP