Landlord and tenant – Possession – Relief from forfeiture – Appellants appealing against decision of recorder that agreement for occupation of property created lease validly forfeited for arrears of rent and refusing relief against forfeiture – Whether recorder erring in law – Appeal allowed in part
The respondents brought an action for possession and arrears of rent in respect of 105, Calcutta Rd, Tilbury, Essex. By a lease dated 15 April 2016, the property was let by the respondents to the appellants for a term of four years, with an initial rent review on 1 April 2020.
By clause 21 of the lease: “if the tenant is in default in the payment of any money, whether hereby expressly reserved or deemed as rent, … and such default continues following any specific due date on which the tenant is to make such payment, or in the absence of such specific date, for the 10 days following written notice by the landlord requiring the tenant to pay the same then, at the option of the landlord, this lease may be terminated on 30 days’ notice and the term will then immediately become forfeited and void”.
By a second action, the appellants claimed a beneficial interest in land adjoining the property and damages. The adjoining land was purchased in the names of the respondents to construct an extension from which the appellants and the second respondent carried on a medical practice as partners. The extension was funded as to one-third by the appellants.
The recorder held that an agreement for occupation of the property by the partnership created a lease. There were substantial arrears of rent and the lease was validly forfeited by the issue of the first action. In the exercise of a general discretion, he refused the appellants relief against forfeiture and dismissed the appellants’ claim to a beneficial interest in the adjoining land. He ordered the appellants to give the respondents possession of the property and the adjoining land and to pay arrears of rent amounting to £98,000 plus interest of £2,430.26 and costs. The appellants appealed.
Held: The appeal was allowed in part.
(1) Clause 21 of the lease distinguished between sums due on a specific date under the lease and sums that were not so due. For the latter, 10 days’ written notice requiring payment was required before the landlord had the option to terminate the lease. The option to terminate upon 30 days’ notice applied in the case of both types of sum due. If 30 days’ separate notice before the election to forfeit were required, the lease would require 10 days’ notice followed by a further 30 days’ notice separately given, followed by a claim form, for sums that were not due on a specific date. The clause was capable of being construed as entitling the landlord to elect to forfeit, by issuing a claim form or otherwise, and for the forfeiture not to take effect until 30 days had expired. That appeared to be the sense of the words used, which spoke of the landlord’s election to terminate upon 30 days’ notice, not 30 days’ notice preceding the election to terminate. Thus, if the arrears due were paid before the expiry of the 30 days, there would be no effective forfeiture. Without a cogent argument to the contrary, the recorder was entitled to interpret the lease in the way he had.
(2) The recorder had not erred in not finding or inferring some representation or assurance on the part of the respondents, or a common intention, that the appellants would have a beneficial interest in the adjoining land, and in finding that there was no reliance on any such representation or assurance.
Although the parties had a common intention that the partnership would occupy the extended premises, it was not clear what common intention, if any, they had about the terms on which such occupation would take place, and in particular whether the partners had an enforceable right against the respondents and their successors in title to the adjoining land to occupy the extended premises for a defined period, and if so what period of time.
(3) In dealing with relief against forfeiture, the recorder did not refer to section 138 of the County Courts Act 1984, or to cases such as Gill v Lewis [1956] 2 QB 1, which explained that equity treated a proviso for re-entry for non-payment of rent as a security for payment of the rent, such that relief would be granted if the arrears, any interest and costs were duly paid.
Instead of making an order in pursuance of section 138, the recorder proceeded as if he had a broad discretion to grant or refuse relief according to the justice of the case. He held that relief should be refused for three main reasons: the difficulty of separating the old premises on the property from the new premises on the adjoining land, given the way that the new premises had been built as an extension of the old premises; the prolonged non-payment of rent and absence of evidence of when the arrears would be paid; and the undesirability of continuing a fractious relationship between the appellants and the respondents by leaving them in the positions of landlord and tenant for many more years.
The recorder was wrong to treat himself as having a broad discretion. Section 138 applied and therefore the appellants were entitled to an order giving them relief against forfeiture on payment of the arrears and the costs of the forfeiture proceedings within a period no shorter than four weeks, regardless of evidence of ability to pay the arrears. The court did not have a discretion save as to the length of the period of time: Golding v Martin [2019] Ch 489; [2019] PLSCS 52 applied.
(4) The arrears and interest had been paid but the costs had not. The recorder made an order for detailed assessment of costs and a payment on account within 14 days, but that sum related to the respondents’ costs of the counterclaim as well as the possession claim. The difficulty arising from the conjoined premises of the property and the additional land was as much of the respondents’ making as the appellants’ making.
By analogy with section 138(3), the court would make an order granting the appellants relief against forfeiture contingently on their paying £35,568 by way of costs to the respondents or into court within 28 days of the date of the order.
Oluwaseyi Ojo (solicitor advocate, of Taylor Wood Solicitors) appeared for the appellants; Antonia Halker (instructed by Rainer Hughes Solicitors, of Brentwood) appeared for the respondents.
Eileen O’Grady, barrister
Click here to read a transcript of Bhat and another v Patel and another
