Landlords lose their right to forfeit a tenant’s lease if they unequivocally confirm the existence of that lease in full knowledge of the fact that the tenant has committed a once-and-for-all breach of covenant. Distraining for arrears of rent used to have this effect because the landlord’s use of the remedy indicated that the tenancy continued to subsist.
But the common law remedy of distress was replaced by a new regime for the recovery of rent arrears in relation to commercial premises with effect from 6 April 2014. The new statutory scheme, which was introduced by the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act), is known as Commercial Rent Arrears Recovery (CRAR). And the question that arose in Thirunavukkrasu v Brar [2018] EWHC 2461 (Ch); [2018] PLSCS 165 was whether a landlord, who had chosen to use CRAR, had waived his right to forfeit his tenant’s lease.
The landlord argued that the rules that applied to distress for rent do not apply to CRAR. He drew the court’s attention to the fact that the legislation does not expressly state that CRAR is intended to replace the old common law remedy. And the statute does not contain any saving provisions of the sort found, for example, in the Companies Act 2006, ensuring that the common law should continue to play a role.
The judge noted that the new statutory process is narrower than the old common law remedy, and that there are material differences between the two regimes. In these circumstances, it could not be said that CRAR is the equivalent of distress. And it could not be presumed that aspects of the old common law regime of distress had been carried forward into the new statutory regime. Nonetheless, the judge decided that the landlord’s use of CRAR did constitute an affirmation of the lease.
The judge accepted that section 79 of the 2007 Act makes it possible for landlords to use CRAR in some limited circumstances, even though a lease is at an end. The tenant had argued that this meant that the use of CRAR cannot, of itself, be an unequivocal recognition of the continuation of a lease – but these submissions were misconceived. The lease had not ended when the landlord resorted to CRAR. And, given that the conditions for using CRAR after the end of a lease were inapplicable, CRAR could only be exercised while the lease continued. So the use of CRAR constituted an unequivocal representation that the lease was continuing and the landlord had waived his right to forfeiture.
The legislation requires landlords to give tenants seven clear days notice before using the new statutory regime. Did the fact that there had been a deficiency in the procedure, because the landlord failed to notify the tenant of his intention to use the new regime to recover the arrears that were due, prevent the application of the doctrine of waiver? The judge’s response was brief and to the point. The landlord’s omission did not erase the use of CRAR. So the tenant’s lease continued in full force and effect.
Allyson Colby, property law consultant
