New tenancy rules would tax best legal brains
A landlord seeking to unilaterally terminate a fixed-term Farm Business Tenancy before the expiry date for "tenant default", including insolvency, currently relies on the law of forfeiture, writes Kathryn Lewis
This is complicated by rules that have accumulated over time and render forfeiture an unreliable ally for the landlord.
As part of its campaign to encourage longer FBTs, the Tenant Farmers Association has proposed that the rules on terminating FBTs of more than 10 years should be amended to allow landlords to terminate more easily than under the current regime in cases of default by the tenant. Cases where the landlord wishes to redevelop the property are usually dealt with by means of a break rather than forfeiture.
The Law Commission put forward a case for reforming the law of forfeiture in 1985 and its draft bill in 1994 was considered and redrafted in 2006 in the expectation that the law would be changed. The bill has never yet been promoted through Parliament but the current discussions about agricultural tenancies may revive interest in it.
The bill proposed to:
Remove the landlords option of peaceable re-entry which would mean forfeiture could only be achieved as a result of a court order.
Remove the rules on waiver so that landlords could still accept rent even while trying to terminate the tenancy (not always possible under existing forfeiture rules).
Strengthen the protection for sub-tenants and mortgagees which currently relies on the relief against forfeiture rules.
Require landlords to serve prior notices on tenants in all cases to facilitate negotiation and compromise.
It is widely agreed that forfeiture rules need to be amended but balancing the interests of both landlord and tenant is not easy. Terminating a tenancy before its expiry date for tenant default or insolvency is a serious remedy and the law of forfeiture has accumulated a number of protections for landlord and tenant.
This will have an impact on the TFA proposals. If the Law Commission proposals are implemented they are not likely to distinguish between short and long-term FBTs.
This would necessitate a separate system being created especially for longer term FBTs, either in addition to, or instead of, forfeiture rights.
* By Kathryn Lewis of Davis Meade Property Consultants
