Lease Termination and Remedies — SQE1 FLK2 Land Law

A tenant of business premises knocks down an internal wall and puts in a mezzanine floor, with no consent, in breach of a covenant against alterations. The lease reserves the landlord a right of re-entry for breach of any covenant. The work can be undone, and the tenant is willing and able to undo it. The landlord serves a notice specifying the alterations and saying the lease will be forfeited. Nothing else. Eight days later he issues proceedings for possession.

He has the right. He has served a notice. He is in court. And he is going to lose, because that notice required the tenant to do nothing at all. This is Lease Termination and Remedies. Keep that landlord in mind.

Here is the route. The ways a lease ends: expiry, notice to quit, surrender, merger, frustration, and the break clause. Then forfeiture, which is most of the marks. Peaceable re-entry, waiver, the statutory notice, and the difference rent makes. Then relief against forfeiture. Then the other remedies for breach. And finally, how a landlord actually gets unpaid rent back.

Start with the simplest. A fixed term ends by effluxion of time. On the contractual end date the lease terminates automatically, the tenant's estate ends, and possession goes back. No notice is needed, though the parties may have agreed notice periods in the lease.

But watch what follows. A tenant who stays on without consent is a trespasser. A tenant who stays on paying rent which the landlord accepts may acquire a periodic tenancy by implication. That is holding over, and the period usually matches the rent payment period.

Which is a trap with consequences. Accept the rent and your client has handed the tenant a new ongoing tenancy. If you want possession, do not bank the cheque.

Second method, the notice to quit, and it is for periodic tenancies only. It cannot end a fixed term early. It must be in writing, specify the termination date, give the minimum notice, and be served properly. And it must expire at the end of a period of the tenancy.

That last requirement is where notices die. A quarterly tenancy needs a notice expiring at the end of a quarter. As to length, a yearly tenancy needs at least six months' notice. A quarterly tenancy at least one quarter. A monthly tenancy at least one month.

One striking point on joint tenants. In Hammersmith and Fulham LBC v Monk the House of Lords held that a periodic joint tenancy continues only so long as all the joint tenants will its continuation. So a notice by one of them determines the whole tenancy.

Third, surrender, where the lease ends early by agreement. Express surrender must be by deed, because it disposes of a legal estate. It releases both parties from future obligations, though past breaches may still be actionable.

Surrender can also be implied from conduct, and this is the examined half. It needs an unequivocal act by both parties, inconsistent with the lease continuing. The tenant gives up possession and the landlord takes the keys. The landlord enters and starts renovation. The landlord re-lets to somebody new.

Unequivocal is the operative word. Accepting keys alone may not be enough if the landlord merely holds them for safekeeping. The court wants clear evidence that both parties meant it.

And note who survives. A surrender cannot prejudice a subtenant, who holds the remainder of the sublease directly from the head landlord. Contrast expiry of the head lease by effluxion of time, which takes the sublease with it.

Fourth, merger. The lease and the reversion come into the same hands and the lease is extinguished, because nobody can hold a lease from themselves. But it is not automatic. Under s.185 of the Law of Property Act 1925 there is no merger at law where equity would find none, and equity looks at intention.

So a landlord who buys in the lease intending to grant a new one keeps the estates separate. The intention may be express or implied, and the purpose of the acquisition usually shows it.

Fifth, frustration, and here resist your contract law instincts. Frustration can in principle apply to a lease. That is National Carriers Ltd v Panalpina. But the House of Lords made plain it will hardly ever do so, because a lease creates an estate in land that goes on existing.

Even destruction of the premises may not frustrate the lease. The risk sits with the tenant, who keeps paying, and who relies in practice on an express clause or the insurance provisions.

Sixth, the break clause, which ends a fixed term early on the terms the lease sets. Those terms are conditions precedent and must be strictly and completely satisfied. A break conditional on all sums due being paid fails if anything is outstanding, including default interest never demanded.

Now forfeiture, which is where the marks are. It is the landlord's right to end the lease and re-enter when the tenant breaches a covenant, and it is the most powerful remedy he has. It exists only if the lease gives it to him.

Try one. A ten-year lease of a warehouse. The roof leaks, part of the floor has given way, and the tenant ignores letter after letter. The lease says nothing about re-entry on breach. Can the landlord forfeit? No. Not for any breach, however grave.

Forfeiture is a creature of the lease, not of the general law. No forfeiture clause, no forfeiture. His remedies are damages, and in a suitable case specific performance or an injunction. Otherwise he waits for the term to expire.

Assume the clause exists. There are two ways to exercise it. Peaceable re-entry at common law, meaning physically retaking possession without a court order, in practice by changing the locks. Or proceedings for possession, which are themselves an unequivocal election to forfeit.

Peaceable means without violence to person or property. Under s.6 of the Criminal Law Act 1977 it is an offence to use or threaten violence to secure entry while someone present is opposed to it. Which is why re-entry happens out of hours, usually by a bailiff who first checks the premises are empty.

Do not confuse that with the tenant being in actual occupation. Every tenant occupies under its lease. What matters is whether a person is physically present and objecting.

And there is one place peaceable re-entry is never available. Under s.2 of the Protection from Eviction Act 1977, premises let as a dwelling require court proceedings. For commercial premises it remains available, but it is risky. Get it wrong and the landlord is a trespasser.

Before any of that, check the right still exists, because it can be lost by waiver. Waiver is an unequivocal act by the landlord, knowing of the breach, which recognises that the lease continues. The classic act is demanding or accepting rent falling due after he knew.

Try this one. A commercial lease with a forfeiture clause. The tenant assigns without consent, in breach of an absolute covenant. The managing agent, knowing all about it, demands the next quarter's rent and banks it. Can the landlord still forfeit for the assignment?

No. That is Central Estates (Belgravia) Ltd v Woolgar. Waiver is judged objectively, so it bites though the landlord never meant to waive, and though an agent took the money. Returning the rent afterwards does not undo it.

But the breach type decides how far the waiver reaches. An unlawful assignment is a once-and-for-all breach, so the waiver is permanent. Disrepair is different. There the waiver covers only up to the waiving act, and every day the breach continues gives a fresh right to forfeit.

Now the statutory procedure. Section 146 of the Law of Property Act 1925 governs forfeiture for breaches other than non-payment of rent. A right of re-entry is not enforceable unless the landlord has first served a notice on the tenant.

That notice must do three things. Specify the particular breach complained of. If the breach is capable of remedy, require the tenant to remedy it and allow a reasonable time. And if it is not capable of remedy, make reasonable provision for compensation.

Which is where our landlord fell over. His notice specified the alterations and announced that the lease would be forfeited. It required nothing. Knocking through a wall can be undone, so the notice had to demand that, and eight days was no reasonable time anyway.

The dividing line is remediability. In Expert Clothing Service v Hillgate House Ltd the Court of Appeal considered a failure to reconstruct by an agreed date. Breach of a positive covenant is capable of remedy, it held, if the harm can be put right in a reasonable time with compensation.

So the test is whether the mischief caused by the breach can be removed. Failing to repair, failing to insure, unauthorised alterations: remediable. An unauthorised assignment that has already happened: not remediable, so the notice provides for compensation instead.

Two more points on the notice. It goes to the tenant, and to the tenant alone. A subtenant or mortgagee need not be served, but each may apply for relief in its own right under s.146(4). The court may vest a new lease in them, on terms of paying arrears and costs.

Repairing covenants carry extra protection. The Leasehold Property (Repairs) Act 1938 applies where the lease was originally granted for seven years or more with at least three years left to run. The notice must then tell the tenant of the right to serve a counter-notice.

Serve that counter-notice within 28 days and the landlord needs the court's leave before forfeiting or suing for damages. The point is to stop minor disrepair being used to forfeit valuable long leases.

Rent is the exception to all of it. Section 146 does not apply to a right of re-entry for non-payment of rent, under s.146(11). No notice, no reasonable time, no counter-notice. The landlord may proceed straight to forfeiture.

One catch remains. At common law he must make a formal demand for the rent before re-entering, unless the lease dispenses with it. Well-drafted clauses say whether formally demanded or not. Without those dispensing words, a re-entry with no formal demand is ineffective.

Now relief against forfeiture, because forfeiture is rarely the end of the story. The court may restore the lease on such terms as it thinks fit. For breaches other than rent that is s.146(2) of the 1925 Act. For rent arrears in the county court, s.138 of the County Courts Act 1984.

The tenant must apply promptly, pay the arrears and other sums due, pay the landlord's costs, and remedy the breach if it can be remedied. Delay may defeat the application, and if the landlord has already re-let, relief may be gone.

Two cases fix the outer limits. In Billson v Residential Apartments Ltd the House of Lords held that a tenant may apply for relief under s.146(2) even after a peaceable re-entry. The bar falls only once a possession order has been executed. Changing the locks first does not shut out relief.

And in Shiloh Spinners Ltd v Harding relief was held possible even where the breach cannot be undone. So non-remediable does not mean irretrievable. But relief is discretionary, never automatic, and the court weighs the tenant's conduct, the breach, and whether the property has been re-let.

Step back, because forfeiture is the last resort. For breach of covenant the landlord can claim damages: the cost of repairs the tenant should have done, or the arrears with interest.

An injunction restrains a continuing or anticipated breach, such as using a unit as a restaurant against a user covenant. Specific performance can compel positive works, though not where damages would do. Both are discretionary.

And the tenant has a shield. A tenant with a claim against the landlord, typically for disrepair, may set it off against the rent, provided the claims are sufficiently closely connected.

Finally, getting the money. Distress for rent, where a landlord seized and sold the tenant's goods, is abolished. The Tribunals, Courts and Enforcement Act 2007 killed it with effect from 6 April 2014. Examiners like a remedy that no longer exists.

Its replacement is Commercial Rent Arrears Recovery, CRAR, and the name is the limit. It needs premises let wholly for commercial purposes with no part occupied as a dwelling, a lease in writing, and net unpaid rent of at least the minimum. That is currently 7 days' rent.

Be careful what counts as rent. Section 76 of the 2007 Act defines it as the sum payable for possession and use of the premises. It excludes rates, council tax, services, repairs, maintenance and insurance, even where the lease calls them rent or lumps everything into one figure.

And here is the misconception. Mixed arrears do not destroy CRAR. The non-rent element is simply excluded from the sum, and the landlord recovers the rent element by CRAR and sues for the rest. What does destroy it is a dwelling. Any residential part and CRAR is unavailable.

Procedure matters too. An enforcement agent must give at least 14 clear days' notice of enforcement, raised from 7 clear days on 1 May 2026. Certain goods are exempt, including third party goods and tools of the trade.

A word on how SQE1 tests this. You will not be asked to recall a case name or a section number. You get a scenario, five answers, and one instruction: pick the best. Learn the rules. The names are memory pegs, nothing more.

If you keep only three pegs. Central Estates (Belgravia) Ltd v Woolgar, where a rent demand threw the forfeiture away. Expert Clothing Service v Hillgate House Ltd, where a positive covenant turned out to be remediable after all. And Billson v Residential Apartments Ltd, where changing the locks did not shut out relief.

Four traps. One: no forfeiture clause, no forfeiture. However serious the breach, a landlord has no general right to end a lease early. The answer is damages, and waiting.

Two: waiver is objective. A demand for rent sent by an agent who knew of the breach waives it, whatever the landlord intended and whoever banked the cheque. Ask what the landlord did with knowledge, never what he meant.

Three: rent is the exception, not the rule. Section 146 governs every breach except non-payment of rent, and for rent there is no notice and no reasonable time. Candidates lose marks by serving a notice that was never needed, or by demanding one that was.

Four: on CRAR, keep two seven-day figures apart. The arrears threshold is 7 days' rent, and it has not changed. The enforcement agent's notice is 14 clear days, doubled from 7 on 1 May 2026. They are different rules and they are easy to swap.

Quick check. A tenant of business premises has not paid the rent for two quarters, and the premises are not let as a dwelling. The lease reserves the landlord a right of re-entry if the rent is unpaid for twenty-one days, whether formally demanded or not. The landlord has demanded the arrears in writing, had no reply, and accepted no money since. He wants the lease ended as fast as possible.

What step, if any, must he take before he can forfeit? Three candidates. One: serve a statutory notice specifying the arrears and allowing a reasonable time to pay. Two: none, and he may forfeit for the arrears at once. Three: first use the statutory procedure for recovering commercial rent arrears. Pause here if you want a moment.

The answer is two. The s.146 procedure does not apply to a right of re-entry for non-payment of rent. The lease dispenses with a formal demand, so the common law requirement does not arise either. He may forfeit at once, by peaceable re-entry, these being commercial premises, or by issuing proceedings. The tenant may then seek relief.

Why the others fail. Option one is the procedure for breaches other than rent, and none is required here. Option three is worse than unnecessary. Commercial rent arrears recovery is an alternative way of getting the money, not a step towards forfeiture, and using it would treat the lease as continuing and waive the right.

Five things to take away. One: six routes out. Expiry. Notice to quit, periodic tenancies only. Surrender, by deed or by unequivocal conduct. Merger, unless the estates are meant to stay separate. Frustration almost never. And the break clause, on strict conditions.

Two: forfeiture exists only if the lease reserves it. Three: waiver is objective, and a rent demand made with knowledge of the breach throws it away, permanently for a once-and-for-all breach.

Four: our landlord had the clause and still lost, because a s.146 notice must require a remediable breach to be remedied, and give a reasonable time. Five: rent is the exception, with no notice needed and relief under s.138 of the County Courts Act 1984. Next time, a new subject: Property Law and Practice.

Practise this topic with exam-style questions at sqe1prep.co.uk. This episode is for education and exam revision only, not legal advice, and we are not affiliated with or endorsed by the SRA or Kaplan.