The right to forfeit is a useful tool in the landlord’s armoury, enabling it to gee up a defaulting tenant, and ultimately to terminate the lease if the tenant continues to fail to perform its covenants. However, possibly more than any other area of leasehold law, the implementation of forfeiture is encrusted with technical rules and creates difficulties on which we are frequently asked to advise.
Relief and waiver
Courts do not like forfeiture very much, seeing it as a means by which landlords can achieve a windfall or act oppressively towards a tenant. The grant to the tenant of relief from forfeiture affords some measure of comfort, but often the reasons that have led to the forfeiture correspondingly leave the tenant unable to comply with the terms for relief.
In such circumstances, the landlord’s conduct is scrutinised to see whether the forfeiture was validly effected. The principal reason that it may not have been is that the right to forfeit was waived by the landlord, making the forfeiture unlawful, and any recovery of possession a trespass. It is thus critical for a landlord to show that there was no waiver of the right to forfeit.
Waiver occurs when a landlord who is aware of the facts that constitute a ground for forfeiture does some unequivocal act recognising the continued existence of the tenancy. A classic example of such an act is a demand for or acceptance of rent with knowledge of the facts constituting the breach. Landlords who do so will be held to have waived their right to forfeit – even if the demand or acceptance was accidentally processed through their agents, contrary to the landlord’s instructions (as happened in Central Estates (Belgravia) v Woolgar (No 2) [1971] 220 EG 803). So the typical question we are often asked in chambers is: can I safely accept rent? The landlord asking that question will be well aware that, if it does not take the rent when it is offered it, it may not ever see the money. It is for this reason that some leases contain a waiver exclusion clause, specifying that demand for or acceptance of rent will not waive the right to forfeit.
Feeding time at the zoo?
The learned authors of Woodfall: Landlord and Tenant, however, take the view that such clauses do not work. The reasoning behind this conclusion is that waiver is a doctrine that works objectively, without regard to the motive of the landlord; thus it is not therefore possible for parties to contract out of a waiver – at least of the right to forfeit.
It may seem surprising that parties are not free to agree what will, or at least will not, amount to waiver of a right to forfeit. This is not the law elsewhere, notably in Australia, and the doctrine was doubted in the most recent case on the subject: The Tropical Zoo Ltd v Hounslow London Borough Council [2024] EWHC 1240 (Ch); [2024] PLSCS 102. There, the local authority landlord had let an area of land to a company with aspirations to construct a zoo on the site. The lease obliged the tenant to complete construction within two years and gave the landlord step-in rights should it fail to do so. Alas, the tenant’s collection of around 489 vertebrates and 73 invertebrates were not to enjoy their new home, because the tenant failed to obtain the finance for its works.
The landlord served a section 146 notice stating that the tenant had failed to comply with an earlier notice requiring it to carry out the works within a further specified period of time. The tenant argued in turn that the landlord had accepted rent after serving the section 146 notice, and had thereby waived its right to forfeit. The landlord sought to rely on an anti-waiver clause in the lease, which stipulated that the right to forfeit would arise “even if the landlord has waived any previous right of re-entry”. Bacon J rejected the argument that this clause effected a general waiver exclusion, but she did note with approval an Australian authority which stated that there was no good reason why the parties to a lease should not validly incorporate an effective anti-waiver clause in their agreement and that, if they did so, that would be a very relevant fact to be borne in mind when considering a claim by a lessee which has committed a breach of covenant that by accepting rent its lessor has made an election to keep the lease on foot.
Prospects of reform
It seems curious that we continue to debate such questions in the context of principles which were invented for another age before relief from forfeiture became widely available. Indeed, it is curious that we still retain the current basis for forfeiture. Our outstanding Law Commission has frequently visited this topic with proposals for reform, most recently in the shape of its report dated 31 October 2006, Termination of tenancies for tenant default.
The authors noted comments by the Committee of HM Circuit Judges that the doctrine of waiver “works against sensible arrangements whereby a party can continue to pay rent while disputed questions of tenant default are litigated”; and by the Society of Legal Scholars, which said that the Commission’s proposal for reform “avoids the landlord losing the right to terminate the lease through an honest mistake of either themselves or their agents”.
Agreeing that waiver is unduly complex and can operate in an arbitrary way, the Commission recommended that the doctrine of waiver should cease to be of any application to the termination of a tenancy. Under its recommended scheme, the tenancy would continue until a termination order is made (or a summary termination takes effect).
Like so much that is published by that eminent body, no proposals for implementation have been made, and there is precious little chance of the government making room in its legislative timetable. In the meantime, keep those questions coming…
Guy Fetherstonhaugh KC and Elizabeth Fitzgerald are barristers at Falcon Chambers
