Leases: mortgagee protection clause

by Practical Law Property

A clause designed for inclusion in a long commercial property lease where a premium is paid. This clause addresses the significant risk that a landlord's right of forfeiture poses to the security held by a tenant's mortgagee. It particularly mitigates the danger of forfeiture by peaceable re-entry, where a mortgagee might otherwise lose its security without prior notice or an opportunity to intervene. The provisions require a landlord to notify the tenant's mortgagee of any breach of covenant before commencing forfeiture proceedings or exercising a right of re-entry, establishing a crucial window for the mortgagee to remedy the breach and protect its interest. This clause also provides optional wording to navigate the application of the Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999), enabling parties to grant the mortgagee a direct contractual right to enforce these important protections..