QUESTION I am the tenant of retail premises under a lease for a term of 15 years from 1 January 2015. The initial rent is at a discount to the market rent in return for the considerable expenditure I have made in fitting out the premises. The rent is due for review in 2020. I fell into arrears with payments of rent earlier this year during a period of illness and personal difficulties. My landlord forfeited the lease by entering and changing the locks in early April 2016. Am I now too late to seek relief from forfeiture and, if not, what factors will the court take into account?
ANSWER The court has a wide jurisdiction to consider relief from forfeiture. Provided that you can (i) satisfactorily explain the reasons for the delay in making the application for relief; (ii) pay to the landlord all the sums that would have been payable had the lease continued (together with the landlord’s costs); and (iii) demonstrate that your landlord has not suffered any prejudice, you are likely to be able to persuade the court to grant you relief.
The court has a wide jurisdiction to grant relief from forfeiture. The court will always lean in favour of granting relief where it is justified and will seek to avoid allowing a landlord to obtain a windfall.
The following are likely to be issues for the court to consider in evaluating your claim for relief from forfeiture.
Delay
Where a landlord pursues a claim for forfeiture through legal proceedings, the court’s jurisdiction is restricted to applications made within six months after the execution of the judgment for possession under section 210 of the Common Law Procedure Act 1852. However, that provision does not apply to applications for relief from forfeiture by peaceable re-entry. In these circumstances the six-month period is to be taken as a guide rather than a strict time limit. Applications for relief should be made with reasonable promptitude but what is reasonable will depend on all the circumstances.
Your application will be made significantly later than six months after the peaceable re-entry. You will need to be able to explain the reason for the delay in making the application. If your illness and personal difficulties have materially affected the position, these are factors which the court may take into account. This issue will be considered as part of an overall evaluation of the issues.
Value
A key consideration will be the balancing exercise to be undertaken by the court, measuring the value of your lease against the size of the arrears.
In the recent decision in Pineport Ltd v Grangeglen Ltd [2016] EWHC 1318 (CH); [2016] PLSCS 172, the underlease had been granted for a premium and the tenant paid a small ground rent. The arrears of rent on which the forfeiture had been based represented 1% of the agreed capital value of the underlease and – if relief were to be granted – the sum to be paid by the tenant in arrears of rent and costs incurred by the landlord would amount to about 10% of its value. The court considered that the tenant had a powerful case for relief in view of the severe disproportion between the sum due and the windfall which would accrue to the landlord if relief was not granted. So you will need to consider your position in this respect.
A further factor in the balancing exercise is whether your landlord has suffered any prejudice as a consequence of your failure to pay the rent on time, the re-entry or your delay in making your application for relief from forfeiture.
Ability to pay
Another factor which will have a bearing on your application will be your ability to pay the sums required to put the landlord back into the position it would have been in had the forfeiture not occurred. Consequently, you will be liable to pay all arrears of rent due at the date the lease was forfeited together with any subsequent payments of rent, service charge and other outgoings due under the terms of your lease which would have fallen due to the date of the hearing of your application for relief from forfeiture.
In addition you will need to pay the expenses incurred by your landlord which would not otherwise have been incurred. These are likely to include bailiffs’ fees, costs in securing and managing the building since the date of re-entry and legal and other professional fees.
The court must be satisfied that you are in a position to make payment of these sums in the “immediately foreseeable future”, so you will need to be in a position to demonstrate this. In Pineport, the court was prepared to accept that a period of 12-16 weeks – during which a property would be sold to raise funds to settle the sum due – satisfied this requirement.
Consequently a number of arguments may be available to you to justify the court granting you relief from forfeiture depending on the evidence.
Louise Clark is a partner in the property litigation team at Charles Russell Speechlys and Zia Bhaloo QC is a barrister and head of chambers at Enterprise Chambers
