Commercial leases: the pitfalls of forfeiture
Forfeiture is a common and cost-effective method of terminating commercial leases, but is not always the best course of action. Criminal liability, claims for relief from forfeiture and financial loss are possibilities if a lease is forfeited incorrectly or is poorly timed. Here, Shoosmiths shines a cautionary light on the major pitfalls of forfeiture.
Forfeiting or terminating a lease in a weak market may leave the landlord with a vacant property which it is unable to sell or re-let. The result is lost rental income and also acquiring the liability as an occupier for all the financial liabilities for the property, including rates, utilities and maintenance. A property is more likely to fall into disrepair and suffer vandalism if left vacant. Not only can this dramatically reduce the value of a landlord’s investment, if a landlord has additional properties in close proximity, it is likely these will also be devalued by association. In re-taking possession of a property, the landlord also re-takes liability for its physical order. A landlord may be liable for injury and/or damage to third parties, including vandals/trespassers and their property if sufficient safety precautions and preventative measures have not been taken…
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