Forfeiture vs a Debt Claim for Commercial Arrears: Choosing the Right Remedy and Managing Relief Applications

Your commercial tenant has stopped paying rent. The arrears are mounting, and the longer you wait, the more complex and costly recovery becomes. You have two main remedies: forfeiture of the lease or a debt claim. 

The right choice depends on your commercial objectives, the state of the local market, and the tenant’s financial position. We act for commercial landlords across England and Wales and can help you navigate both routes.

Our property litigation team at Helix has decades of experience dealing in complex matters requiring in depth knowledge and strategic awareness. If you are dealing with a commercial tenant who is refusing to pay, reach out to our specialist litigation team today. We are happy to help.

Understanding the Available Remedies for Commercial Arrears

The two main remedies for commercial arrears are a debt claim or forfeiture of the lease. If the lease has a guarantor, it may also be possible to claim from a third party who has guaranteed the lease obligations.

Some commercial leases are supported by a rent deposit deed, under which a tenant has provided a set sum — typically three to six months’ rent — as security against defaults and other sums owed. You have the option to draw down on this to cover rent arrears and interest. If the tenant remains in occupation, they’ll have to replenish the sum.

Deciding on the most appropriate and cost-effective course of action should always be made with professional advice. A key factor is your objective: do you want to keep the tenant (and lease) while recovering the outstanding monies, or do you want possession and a new commercial tenant?

Assessing whether the arrears are due to a temporary or permanent problem is essential and helps dictate the right approach. A commercial tenancy can get back on track if only a couple of quarters’ payments are missing, supported by a short-term payment plan and appropriate legal advice.

However, if the local rental market is strong and there are more than two quarters of arrears, then forfeiture followed by a debt claim may be the most appropriate course of action.

Negotiating with a tenant and agreeing to part payments or variations to payment dates — without specialist advice and a carefully drafted agreement — could waive your right to forfeit the lease. It’s essential to take prompt legal advice. From a strategic perspective, speaking to a specialist solicitor clarifies all available options and is vital before communicating with a tenant who is in breach.

What Is Forfeiture of a Commercial Lease?

Forfeiture is a right in English law for a commercial landlord to terminate a lease and regain possession of their property if a tenant breaches key provisions — also known as covenants — in the agreement. The lease is brought to an end and the tenant’s interest is extinguished. .

A common breach is non-payment of rent, but there are others, including unauthorised subletting, altering the property without permission, and failure to maintain the building. For breaches other than non-payment of rent, the landlord may need to first serve a notice under section 146 of the Law of Property Act 1925, specifying the breach and requiring it to be remedied (if capable of remedy) before the right of forfeiture can be enforced. 

Forfeiture isn’t a quick route to repossession. There’s a defined process you must follow, and courts tend to favour leaving a tenant in place if they can remedy the breach, including paying their rent arrears.

Tenants have the right to apply to the court for relief from forfeiture under section 146(2) of the Law of Property Act 1925. If the tenant remedies the breach — such as repaying the rent owing — the court may grant relief at its discretion. This typically reinstates the lease retrospectively, subject to any conditions imposed by the court, as if the forfeiture had not occurred. The court will typically consider factors such as the seriousness of the breach and the conduct of the parties when deciding on whether to grant relief. 

What Is a Debt Claim for Rent Arrears?

A debt claim for rent arrears is legal action taken to recover money owed. There is a process to follow, including preparing a Letter of Claim (also referred to as Letter Before Action).. Subject to the terms of the lease, the debt claim may include interest on the sum owed, late payment fees, and legal costs..

It’s not a case of forfeiture vs a debt claim — they’re not mutually exclusive. You may pursue forfeiture to regain possession and also pursue your tenant through the courts for unpaid rent arrears.

As a commercial landlord, you also have the option of CRAR (Commercial Rent Arrears Recovery). CRAR was introduced under the Tribunals, Courts and Enforcement Act 2007. It’s a statutory process that enables you to recover unpaid rent and interest by taking and selling the tenant’s assets to an equivalent value. 

Importantly, serving a CRAR notice treats the lease as still in force — which means it acts as a waiver of your right to forfeit for that specific breach. You shouldn’t use CRAR and forfeiture for the same default at the same time.

Relief from Forfeiture: What You Need to Know

One of the main challenges with forfeiture is the tenant’s right to apply to the court for relief. It means forfeiture is never a foregone conclusion, even with clear evidence of a breach.

If the tenant applies to the court, has paid all arrears and interest plus your reasonable costs, and can demonstrate they’ll meet their future obligations, the court is likely to grant relief and reinstate the lease. Forfeiture is therefore often more of a powerful threat than a guaranteed solution.

Managing Relief Applications in Practice

Relief is a discretionary remedy, so the court will consider not only the tenant’s position and application but also the nature of the breach and the conduct of both parties.

You should be present at the hearing. You may give evidence of other breaches of the lease, provide documentation supporting genuine concerns about future arrears and solvency, and explain the impact the breach has had on you. A tenant who delays submitting their application for relief may be viewed less favourably by the court.

Common Pitfalls When Recovering Commercial Arrears

Not acting promptly is one of the most common mistakes — delay makes these situations more complex and arrears more costly to recover.

Failing to keep accurate written records of all communications with your tenant is another significant risk. You may need to rely on that correspondence later.

Making a procedural or substantive mistake during the forfeiture process can delay or invalidate your right to forfeit entirely. Forfeiture is a complex remedy with stringent requirements set by both the lease and statute.

Inadvertently undermining your legal position is easier than many landlords realise. Accepting a partial payment, issuing routine demands for rent or service charges, negotiating new tenancy terms, using a rent deposit to cover arrears, or doing anything that treats the lease as continuing may waive the right to forfeit. Any act that unequivocally recognises the lease as still in existence, done with knowledge of the breach, is capable of constituting waiver. 

Finally, starting court proceedings for a debt claim that your tenant defends can become a lengthy and costly process. Getting specialist advice early helps you assess which route — or combination of routes — is right before committing.

Frequently Asked Questions

Can a Landlord Recover Rent Arrears After Forfeiting a Lease?

Yes — forfeiture and a debt claim aren’t mutually exclusive. If you successfully forfeit and regain possession, you can still pursue a debt claim to recover rent arrears and other charges that accrued before the lease was terminated.

Does Forfeiture Guarantee Recovery of Unpaid Rent?

No. Forfeiture gives you the right to regain possession of your property; it doesn’t automatically recover outstanding rent. Any arrears and other charges must be pursued through the courts separately. If your tenant’s business is in financial difficulty, you may be one of several creditors.

When Should a Landlord Choose Forfeiture Over a Debt Claim?

In a buoyant rental market, with a desirable property, you may prefer a new and more reliable tenant — particularly if market conditions suggest rapid re-occupation. If the lease breach doesn’t relate to unpaid rent, a debt claim will not be available — but you may have other remedies, including forfeiture, a claim for damages, or an injunction, depending on the nature of the breach. 

Need Advice? Contact Helix Law.

If your commercial tenant has stopped paying rent, prompt action is essential. Early intervention minimises disruption — delay leads to greater complexity and higher costs.

We’re specialist litigation solicitors in commercial and property litigation disputes, acting for landlords across England and Wales on forfeiture proceedings, and debt recovery. We’ll give you a realistic assessment of your options and help you avoid the pitfalls that can inadvertently cost you your right to forfeit. Contact Helix Law today to speak with a specialist. Our team act nationally and would love to assist you.