Forfeiture
It is the action of having something taken away as a result of, or as punishment for, doing something wrong. It is the loss or giving up something as a penalty for wrongdoing. It is the loss of any property without compensation as a result of defaulting on contractual obligations, or as a penalty for illegal conduct. For doing such wrong or illegal act, a person loses title to his property. For example, forfeiture of a deposit for not closing a purchase transaction is a common stipulation in a real estate sales contract. It is when a landlord ends the lease due to the tenant breaching the terms of that lease by not paying their rent, or by other significant breaches.
Forfeiture is the act of giving up something as payment, or a penalty. Forfeiture, under the terms of a contract, refers to the requirement by the defaulting party to give up ownership of an asset, or cash flows from an asset, as compensation for the resulting losses to the other party. It is a broad term that can be used to describe any loss of property without compensation. A forfeiture may be privately arranged. For example, in a contractual relationship, one party may be required to forfeit specified property if the party fails to fulfill its contractual obligations. A Commercial Landlord does not have an automatic right to forfeit a lease before the specified termination date without recourse to the Courts, and can only do so if there is a relevant Clause specified in the Lease.
Advantages –
- It is a quick and effective method to regain control of your property.
- It is a useful tool for landlords who want to protect their interest in the property and obtain possession when a tenant breaches the lease or becomes insolvent.
- The property may be made available almost immediately for redevelopment, be re-let at a higher rent in a buoyant market, or a landlord may simply be able to rid him/herself of a problem tenant.
- The tenant is unaware that the procedure will take place, and so has no time to damage property, or squat on the premises and forces the Landlord to use the Court process, which can be long wined and costly.
Cons for Forfeiture
- Once possession is re-taken, until a new tenant is in place, the Landlord will be liable for payment of insurance, and may be liable for utilities and business rates too, although empty rates relief may be available.
- There is also a risk that squatters may move into the empty property. Landlords may, therefore, want to ensure that extra security measures are put in place.
