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.
However, 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 Brar v Thirunavukkrasu [2019] EWCA Civ 2032; [2019] PLSCS 231 was whether a landlord, who had chosen to use CRAR, had waived his right to forfeit his tenant’s lease for the arrears of rent then outstanding.
The landlord argued that CRAR is not identical to the old common law remedy of distress for rent – and is available only to landlords of commercial premises. He also drew the court’s attention to the provisions of section 79 of the 2007 Act, which make it possible for landlords to use CRAR in some limited circumstances, if a tenant remains in possession even though its lease is at an end. The tenant argued that this meant that the use of CRAR is a neutral act and cannot, of itself, constitute unequivocal recognition of the continuation of a lease.
But the Court of Appeal was unimpressed. It ruled that the existence of a statutory power to exercise CRAR after a lease has ended cannot logically throw any light on whether the exercise of CRAR beforehand waives the right to forfeit – and was satisfied that, in principle, the use of CRAR has the same effect as levying distress at common law used to have. In other words, the use of CRAR amounts to an unequivocal election to affirm a lease.
The legislation requires landlords to notify tenants 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 CRAR to recover the arrears that were due, prevent the application of the doctrine of waiver?
The Court of Appeal response was brief and to the point; the landlord’s argument had no merit. Even if the landlord’s use of CRAR was technically invalid due to the lack of prior notice to the tenant, and the presence of enforcement agents on the property was, strictly speaking, a trespass, the landlord had intended to use the statutory remedy. Applying Ward v Day (1863) 4 B&S 337, 122 ER 486, this was an indication of the landlord’s state of mind – ie that he considered that the lease continued to subsist. Consequently, the landlord had waived his right to forfeiture. It followed that the purported forfeiture of the lease was unlawful and that the landlord was liable to his tenant for damages for trespass and for breach of covenant.
Allyson Colby, property law consultant
