Commercial landlord lockout for rent arrears

This is a question that comes up frequently and the answer is yes, in many circumstances a commercial landlord can lock you out, but the legal position is quite different from residential tenancies and there are important details to understand.

The legal mechanism: Commercial Rent Arrears Recovery (CRAR) and peaceable re-entry

For commercial premises, landlords have historically had the right of peaceable re-entry, sometimes called forfeiture by physical re-entry. This means that where a lease contains a forfeiture clause (almost all commercial leases do), the landlord can physically re-enter and change the locks to forfeit the lease, provided this is done peaceably and without the use or threat of violence.

This is lawful because the Protection from Eviction Act 1977, which prevents landlords from locking out occupiers without a court order, generally does not apply to commercial premises. Section 2 of that Act only protects residential occupiers.

Key conditions for a lawful lockout of commercial premises:

1. The lease must contain a forfeiture clause that is triggered by rent arrears (or another breach).

2. Re-entry must be peaceable. If the landlord uses or threatens violence to gain entry, that could amount to a criminal offence under the Criminal Law Act 1977, section 6.

3. In practice, most commercial landlords carry out re-entry at night or at a time when the premises are unoccupied, precisely to avoid any confrontation.

4. If the arrears relate to non-payment of rent (as opposed to another breach of the lease), the landlord is generally not required to serve a section 146 notice under the Law of Property Act 1925 before forfeiting. This is because section 146(1) expressly excludes a condition for forfeiture on non-payment of rent.

Your rights as a tenant:

Relief from forfeiture is the main protection available to a commercial tenant who has been locked out. You can apply to the court for relief from forfeiture, which, if granted, effectively reinstates the lease as though forfeiture had never happened. The court has a broad discretion but will generally grant relief if you pay the arrears, costs, and any interest within a reasonable time. The key authorities for this are section 146(2) of the Law of Property Act 1925 and the court's inherent equitable jurisdiction.

Time is critical. If the landlord has forfeited by peaceable re-entry, there is no strict statutory time limit for applying for relief in the way there would be under the Common Law Procedure Act 1852 (which applies where forfeiture is by court proceedings). However, delay can count against you and if the landlord re-lets the premises to a new tenant, your chances of obtaining relief diminish significantly.

Practical considerations:

If you are currently locked out, the most important thing is to act quickly. You should consider the following steps.

1. Check whether the landlord has left any notice on the premises or sent any communication confirming that the lease has been forfeited.

2. Do not force entry or attempt to re-enter by breaking locks. This is likely to escalate the situation and could create problems for you.

3. Calculate the total arrears and consider whether you are in a position to pay them in full, or at least make a substantial payment. Your prospects of obtaining relief are much stronger if you can clear the arrears quickly.

4. Seek to negotiate directly with the landlord. Many landlords will agree to accept payment and reinstate the lease rather than deal with the cost and delay of finding a new tenant, particularly if the premises are not in high demand.

5. If negotiation fails or the landlord refuses to engage, an urgent application to the court for relief from forfeiture is the appropriate route. This can be made to the County Court or the High Court depending on the circumstances.

6. If you have valuable stock, equipment, or belongings inside the premises, raise this immediately with the landlord. You generally have a right to collect your goods, and the landlord cannot simply appropriate them, although there are complications if the landlord also has a right of distress or CRAR.

Important caveats:

The position can be affected by the specific wording of your lease, any prior correspondence about the arrears, whether there are guarantors or subtenants involved, and whether the landlord has waived the right to forfeit by accepting rent or otherwise acknowledging the continuation of the lease after the arrears arose. Waiver is a real issue because if the landlord has done anything after becoming aware of the breach that is consistent with the lease continuing, forfeiture may not be valid.

If your situation involves a mixed-use premises with a residential element, the position may be more complicated and the protections of the Protection from Eviction Act 1977 may apply to the residential part.

In short, yes, a commercial landlord generally can lock you out for rent arrears, but you have a powerful remedy in the form of relief from forfeiture if you act promptly and are able to address the arrears.