What Happens When There is a Forfeiture of a Commercial Lease?

Busy cityMost commercial businesses lease or rent out their space rather than purchase for themselves. This often comes up cheaper and has a lower risk than having a property of their own.

However, if a business is not able to pay their lease on time or if it is several months behind in arrears, then the owner of the property has every right to go ahead and stop the contract. This is called forfeiture.

When a forfeiture of a commercial lease happens, the property believes that there was a breach of the rental agreement. The owner can then decide to forfeit the lease and end the rental agreement.

What happens when there is a forfeiture of a commercial lease?

Typically, when a commercial tenant has been behind in their rental payments, a property owner or landlord could decide that there was a breach of the rental agreement. In those cases, a landlord has the right to forfeit and cancel the rental contract.

Now, to recover the losses from the commercial space, a landlord may employ the services of a company that uses certificated bailiffs for debt enforcement. Certificated bailiffs have the power to lock down the business or company premises.

This generally sends the message that you forfeited the rental agreement, and any items inside the space that are not taken out after a certain period or if the tenant does not settle the lease will be sold. The tenant will have to pay, or you will forfeit their furniture and equipment.

In the case that the landlord proceeds with the forfeiture, the bailiff has the power to literally go up to the establishment and put chains around its main doors and lock the space from the tenants. When this happens, the tenant usually has a few days to a few weeks to settle the debt owed to the landlord.

When there is no resolution reached, the bailiff can basically repossess all the items on the premises and have them auctioned or sold. This is so that the landlord can recover their losses from the unpaid lease and so that they can clear the space for a new tenant.

What to do if there is a breach of the rental agreement

As the landlord, you need to make sure to take the time to assess the situation and try to think calmly. Emotions can only aggravate the situation so no matter how aggravated you are, it is never a good idea to get emotional and go on the offensive straight away.

Try to always settle this issue as diplomatically as possible.

Talk to the owner of the business establishment and communicate the issue clearly. The company may be experiencing a cash flow problem that is making it difficult for them to pay on time. Try to settle the matter as amicably as possible and try suggesting to make a payment arrangement of some sort.

If all else fails, going for professional debt enforcement is the next best option.