Relief — Nature and terms — Mortgagee by subdemise — Whether liable for mesne profits — Whether service charge deemed to be rent — Date from which relief could be granted — Whether underlessee could obtain relief — Landlords’ appeal dismissed
Four appeals involved a mortgagee by subdemise seeking relief against forfeiture of a long lease granted for a premium and at a low rent. Each lease contained covenants by the tenant to pay service charge as well as rent; the service charge not being reserved as rent. In two cases, the lease stated that the service charge “shall be deemed to be … additional rent …”, but was not reserved as such in the reddendum. Each lease contained a proviso for re-entry on non-payment of rent and in each case the lease was mortgaged by the tenants in favour of the building societies.
The building societies were granted relief against forfeiture retrospectively on terms that all arrears were paid, but not mesne profits. The landlord argued that relief could only be granted as from the date of the order granting it on terms that all arrears of rent and service charge were paid up until the date of the forfeiture and thereafter mesne profits until the date of the order.
Held The landlord’s appeal was dismissed.
1. Those leases which provided that the service charge should be deemed to be sums due by way of additional rent had the effect of conferring the attributes of rent on the service charge. That effect was confirmed by the further provision that it should be recoverable as rent. By holding thus, the court was giving full effect to the parties’ agreement, not defeated by a failure to reserve the service charge as rent in the reddendum.
2. In the cases where the building society paid all rent and service charges plus costs of the action five clear days into the county court before the action, it was automatically entitled to relief against forfeiture under section 138(2) of the County Courts Act 1984.
3. In the case where proceedings were brought in the High Court, and governed by section 38 of the Supreme Court Act 1981, the question whether relief was granted retrospectively by reinstatement of the lease was to be answered in the affirmative. The terms of section 38(2) stated that the person to whom relief was granted “shall hold the demised premises … without the necessity for a new lease” and expressly contemplated that relief could be granted to an underlessee.
4. In the final case, although there were arrears of service charge the lease contained no provision deeming the sums to be additional rent so it could not be treated as rent. The case, heard in the county court, could only be brought under section 146 of the Law of Property Act 1925. The court would construe section 146(2) to include the building society so that where a lessor was proceeding to enforce a right of forfeiture under subsection (1), an underlesee, no less than the lessee might apply to the court for relief: see definition in section 146(5)(b) of “lessee”. That conclusion had the merit of producing an identity among those obtaining relief under section 38 of the Supreme Court Act and section 138 of the County Courts Act, as well as under section 146.
5. The effect of relief under section 146(2) was to restore the lease as if it had never been forfeited, and with it any underlease. Relief under section 146(4), on the other hand, could only be granted from the date of the order.
David Neuberger QC and Graham Clark (instructed by Malthouse Chevalier) appeared on behalf of the landlords; Michael Driscoll QC, John McGhee and Timothy Harry (instructed by Denton Hall, of Milton Keynes) appeared for the mortgagees.
