Commercial premises – Forfeiture of lease – Relief – Defendant landlord effecting forfeiture by re-entry on ground of rent arrears – Claimant subsequently paying off arrears – Whether possible to effect relief from forfeiture by agreement of parties – Whether necessary to make formal application to court under section 139 of County Courts Act 1984 – Whether defendant acting unreasonably in requiring such application by claimant – Costs awarded in favour of defendant
The claimant held part of the ground floor and basement of commercial premises in London SE1 on a lease granted by the defendant in 2007 for a term expiring at the end of September 2012. The lease contained a provision for re-entry by the landlord in the event that the rents reserved remained in arrears for 14 days after they became due, whether or not they had been formally demanded. In late May 2011, the defendant physically re-entered the premises and locked the claimant out, on the grounds of non-payment of rent in the sum of £2,5445.
The claimant did not dispute that the defendant had been entitled to effect peaceable re-entry and that such forfeiture of the lease was lawful. However, it maintained that, once it paid off the rent arrears, the defendant could simply accept that forfeiture was relieved and the lease could continue without any need for any application to the court. The defendant did not agree; it was concerned that, in such circumstances, a new lease might arise under Part II of the Landlord and Tenant Act 1954. It therefore required the claimant to make a formal application to the court, under section 139 County Courts Act 1984, for relief from forfeiture.
The claimant made such an application and relief from forfeiture was granted. The main issue was who should bear the cost of those proceedings. The claimant contended that the defendant should be ordered to pay its costs on an indemnity basis on the ground that it had unreasonably required the claimant to issue proceedings for relief.
Held: Costs were awarded in favour of the defendant.
To forfeit a lease at common law merely required an unequivocal act on the part of the landlord, such as entering the premises and taking possession, at which that point the lease came to an end and would remain so unless and until the lessee applied to the court for relief under section 139 of the 1984 Act: Billson v Residential Apartments applied. Once the defendant had physically re-entered the premises the lease was brought to an end by operation of law. That re-entry, once it happened, could not simply be “set aside” or “waived” or made fictional by agreement of the parties. Equally, the lease, having gone, could not simply be revived at the whim of the parties on the pretence that there had been no forfeiture. It was only where an application was made to the court for relief from forfeiture, and such relief was granted, that the tenant could continue to hold according to the same lease, without any new lease. This occurred by reason of the specific statutory provision to that effect in section 138(9B). The corollary was that any purported relief granted by the landlord without application to the court would amount to the grant of a new lease: Taylor v Wildin (1868) LR 3 Ex 303 applied.
It followed that, in order to preserve and continue the original lease between the parties, an application to the court under section 138 was necessary. Any other consensual arrangement between the parties, in the absence of such an application, would be likely to amount to the grant of a new lease and would therefore be prejudicial to the landlord since it would not be contracted out of the 1954 Act.
So far as costs were concerned, the defendant could not be criticised for enforcing its legitimate right following the claimant’s default. Its forfeiture of the lease and subsequent insistence that the claimant issue an application for relief was not unreasonable. Had the claimant adopted a reasonable approach, a consent order would have been agreed at a much lower cost than the proceedings had occasioned. The defendant had been prepared to allow the claimant back into possession on reasonable terms and the issue has escalated out of proportion only because the claimant was not only refusing to pay the defendant’s costs but was requiring the defendant to pay indemnity costs to it on an entirely fallacious basis. Costs were awarded against the claimant on an indemnity basis.
Edward Denehan appeared for the claimant; Toby Waktin (instructed by Maxwell Winward) appeared for the defendant.
Sally Dobson, barrister
