The court will assess the factual position when considering whether a re-entry is unlawful and applications for relief from forfeiture.
In Chug and another v Dhaliwal and another [2023] EWHC 804 (Ch), the court has dismissed an appeal against refusal to declare a re-entry unlawful and to grant relief from forfeiture.
The case concerned shop premises in Hounslow owned by the defendants. In July 2005, the premises were let to the first claimant on a lease which contained clauses prohibiting the tenant from altering the property, parting with possession or allowing others to occupy it without consent.
In 2016, the first claimant agreed with a third party, Mr Dhawan, to sell his business. Mr Dhawan went into occupation of the property carrying on business through the second claimant company. No licence to assign was granted.
In January 2019, the defendants realised the position and potential further breaches of covenant. They continued to accept rent but in May 2019 served a notice under section 146 of the Law of Property Act 1925 for breaches of the alteration and alienation clauses and arrears of rent. They re-entered in July 2019, evicting Mr Dhawan.
Negotiations followed. The judge found that the first claimant accepted the forfeiture in return for the defendants agreeing not to pursue him for dilapidations and that Mr Dhawan was allowed into the property on 20 July 2019 as a licensee or tenant-at-will pending negotiations for a new lease. Those negotiations foundered and the defendants re-entered again in December 2019 and granted a new lease to a third party.
The claimants sought a declaration that the July 2019 re-entry was unlawful or, alternatively, relief from forfeiture. Their claims were dismissed in the county court. Their appeal to the Chancery Division also failed.
The judge found that a fresh start had been agreed in July 2019. The first re-entry was lawful but, even if it was not, it was overtaken by the subsequent agreement between the first claimant and the defendants. The second re-entry was justified because Mr Dhawan was a licensee or tenant-at-will.
Breach of the alienation clause is a continuing breach of covenant and so there was no waiver of the right to forfeit. The section 146 notice was not defective: a reasonable person would not have been misled by inaccuracies and understood it to require him to regularise occupation of the premises. In light of the judge’s findings on the facts, the issue of relief against forfeiture did not arise.
Louise Clark is a property law consultant and mediator
