In leasehold transactions, several options are available to a lessor whose lessee has unlawfully held on to his or her property without fulfilling the terms and obligations under the lease agreement. To evict such defaulting lessee, the lessor often has to resort to the Court for an order of possession as well as arrears of rent, mesne profit and other ancillary prayers to put such lessee out of possession and regain possession of his/her property.
One of the remedies available to a lessor to recover possession of the property is forfeiture, which entitles the lessor to a right to re-enter and forfeit the property in the event of a breach of a fundamental term of the lease by the lessee.
This piece aims at examining the concept of forfeiture in recovering possession of premises as well as the legal procedures, modalities and advantages of the same to an aggrieved lessor.
WHAT IS FORFEITURE?
Forfeiture is the divestiture of property without compensation.[i] It refers to the loss of a right, privilege, or property because of a crime, breach of obligation or neglect of duty.[ii]
Simply put, it is the right of a lessor/landlord to re-enter and regain possession of his property owing to a breach of any of the covenants in the Deed of Lease.
In the case of OYEWUMI v. OFILI (2016) LPELR-42263(CA), the term forfeiture was defined thus:
“It is a right which endears in the landlord and is aimed against a tenant who is in breach of the tenancy.[iii]
The law presumes against forfeiture of leases except where the clause for forfeiture is expressly stated. The lessor will be required in a court action to strictly prove the breach of covenants by the lessee. This was aptly captured by the court in the case of HELIOS TOWERS (NIG) LTD v. MUNDILI INVESTMENTS LTD[iv] where the court held thus:
“Forfeiture is not automatic; breach of covenant does not automatically bring the lease to an end, it merely gives the lessor the right to seek to forfeit the lease. Consequently, where there has been a breach of covenant of condition of a lease, the lessor must seek an order of Court to forfeit the lease and for recovery of possession. The lessor has no automatic right of re-entry”[v]
WHAT IS A FORFEITURE CLAUSE?
According to the Blacks Law Dictionary, a forfeiture clause is a contractual provision stating that under certain circumstances, one party must forfeit something to the other.
It is a clause in a lease agreement which may lead to the suspension or termination of the lease either for non-payment of rent or non-observance of the covenants of the lease. It operates to bring a lease to an end earlier than it would otherwise terminate. For a lessor to rely on forfeiture, the lease agreement must contain an express provision for a forfeiture clause. Where no such clause is present in the Deed of Lease or Lease Agreement, and there is a breach of a term of the lease by the lessee, the lessor’s right would lie only in damages or specific performance as such a lessor will not be able to rely on forfeiture.
It is imperative to note that the existence of a forfeiture clause does not make the lease void but only voidable at the instance of the lessor, not the lessee.[vi] Examples of clauses capable of making a lease forfeited against the lessee are the covenant on rent, the covenant on use, the covenant on assigning/subletting, etc.
ENFORCEMENT OF FORFEITURE CLAUSES
The breach of any of the covenants in a lease automatically entitles the lessor to a right of forfeiture and re-entry were explicitly stated in the lease agreement. The clause can be enforced:
- Through peaceful re-entries, such as changing the locks or granting a new tenancy;
- Through Court actions for possession in the appropriate Court with jurisdiction to recover possession of the premises.
Examples of covenants whose breach could trigger enforcement of forfeiture are covenant on use, covenant to pay rent, covenant to repair, the covenant on assignment or sub-letting, covenant to insure, etc.
It is important to state that the most appropriate way to enforce the forfeiture right is through the Court, as failure to do that would expose the lessor to an action for trespass. This was aptly captured by the Court in the case of HELIOS TOWERS (NIG) LTD v. MUNDILI INVESTMENTS LTD[vii] thus:
“…Any exercise of such right of re-entry without the appropriate order of Court will open the lessor up to a claim in trespass”[viii]
WAIVER OF FORFEITURE RIGHT
It is important for an aggrieved lessor to consider whether he has waived his right to forfeit a lease before any step is taken to forfeit the same. Waiver of forfeiture right can be expressed or implied.
- It is expressed where it is documented and agreed to by parties.
- It is implied where the lessor, by omission, permits perpetual default in pay. Even if the tenant has breached the terms of the lease (or suffered an event of insolvency), the landlord may have waived their right to forfeit the lease if they treat the lease as continuing after the breach of the lease has occurred.
WHAT AMOUNTS TO A WRONGFUL FORFEITURE?
Despite the existence of this right, certain conducts would render the exercise of the right impossible. When this happens, the forfeiture is said to be wrong. Examples of conducts that constitute wrongful forfeiture are:
- Resorting to self-hep after the occurrence of a breach of the covenants in the lease by the lessee
- Boycotting the Court in exercising the right of forfeiture
- Exercising the right to forfeit when the same has not arisen
- Attempting to enforce after waiving the right to do so by the lessor, etc.
ADVANTAGES OF FORFEITURE
Exploring the option of forfeiture has some advantages for the lessor. Some of these includes:
- Forfeiture or re-entry is a useful tool for landlords who want to protect their interest in the property and obtain possession when a lessee breaches the lease or becomes insolvent.
- It is a legally quick and effective method to regain control of the property by the lessor.
- It allows for the property to be made available for redevelopment and be re-let at a higher rent in a buoyant market In line with the existing market value of the property.
- It enables the lessor to rid him/herself of a problematic lessee.
- Another striking advantage is that forfeiture can lead to recouping lost funds and generating more funds in the future for the lessor.
- Such a clause dispels any attempt to block the recovery of property by the lessor.
- It also serves as a caution to the lessee, ensuring fair use of the property.
- The clause subsists in perpetuity, devolving on the personal representatives of the lessor (where he is deceased)
CONCLUSION
Forfeiture is a vital remedy available to lessors to re-enter and take possession of their property in the event of a breach of any of the covenants contained in the Deed of Lease. Thus, lessors need to be meticulous and deliberate about enforcing the clause and ensuring all the legal conditions required to implement the same are met.
[i] Bryan A. Garner Blacks Law Dictionary, (Ninth Edition) Pg. 722
[ii] Ibid
[iii] See also PILLARS (NIG.) LTD v. MRS. HANNAH DESBORDES & ORS (2009) LPELR-8204(CA).
[iv] (2014) LPELR-24608 (CA)
[v] See also Lawani vs Tadeyo (1944) 10 WACA 37, Ogbakumanwu vs Chiabolo (1950) 19 NLR 107, Coker vs Jinadu (1958) LLR 77, Aromolaran vs Wadell (1958) SCNLR 267, Akinkuowo vs Fafimoju (1965) NMLR 349, Oniah Vs Onyia (1989) 1 NWLR (Pt 99) 514, Abioye Vs Yakubu (1991) 5 NWLR (Pt 190) 130, Ude Vs Nwara (1993) 2 NWLR (Pt 278) 638, Akintola vs Oyelade (1993) 3 NWLR (Pt.282) 379, Odunsi vs Bamgbala (1995) 1 NWLR (Pt.374) 641
[vi] Y.Y Dadem Property Law Practice in Nigeria, Jos University Press Limited (4th Edition) pg. 129
[vii] Supra
[viii] Ikomi Vs Cole (1960) SCNLR 199, Elechi vs Nwosu (1963) 2 SCNLR 274, Nigerian Land and Sea Foods Ltd vs Roadside Engineering & Foundry Ltd (1987) 1 NWLR (Pt 48) 191 and Lagos State Development & Property Corp vs Nigerian Land and Sea Foods Ltd (1992) 5 NWLR (Pt.244) 653
Written by Muhiz Babatunde Adisa for The Trusted Advisors
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