Landlord and tenant – Breach of covenant – Original lessee transferring interest to connected company – Respondent landlord bringing action for possession – Court granting application for forfeiture of lease – Whether respondent waiving right of forfeiture – Whether appellants entitled to relief from forfeiture – Appeal dismissed
The respondent company owned a block of flats. In 1987, a 125-year lease of one of the flats in the block was granted to W. In 1994, the respondent agreed to transfer the lease from W to the second appellant.
Following disagreements with the respondent, the second appellant refused to pay the ground rent, service charge and insurance, and, in April 1998, proceedings were commenced for recovery of the arrears. At trial, the second appellant agreed to pay £7,750 and a consent judgment for that amount was entered against him in July 2001.
In November 2001, the second appellant assigned his interest in the lease to the first appellant, a company that he had founded. The transfer was registered, but the respondent did not receive notice of the transfer until 30 November, when it was told that the rent in future would be paid by the first appellant. The respondent indicated that it would not consent to the assignment, as required by the lease, and placed a stop on the demands for rent and other charges on the basis that they could constitute a waiver of forfeiture of the lease.
On 9 December 2002, the respondent wrote to the second appellant, copied to the first appellant, informing it that, if it failed to pay all outstanding arrears, the respondent would commence proceedings for forfeiture of the lease and possession of the flat. A letter of 7 January 2003 indicated that proceedings would be issued for all outstanding arrears.
The respondent then gave notice, under section 146 of the Law of Property Act 1925, of its intention to forfeit the lease and it applied to the county court for possession of the flat on the ground that the lease had been forfeited. The proceedings were adjourned and the first appellant assigned its interest back to the second appellant. The judge subsequently rejected the second appellant’s argument that the letters sent by the respondent in December 2002 and January 2003 had amounted to a waiver of the right to forfeit and refused relief against forfeiture. The appellants appealed. The question arose as to whether an unqualified demand for rent had the same effect as the acceptance of rent.
Held: The appeal was dismissed.
It was clear that the respondent had not intended to waive its right to forfeiture. The disputed letters had not amounted to a waiver of the forfeiture of the lease since neither letter was so unequivocal that, when considered objectively, it could only be regarded as consistent with the lease continuing: Yorkshire Metropolitan Properties Ltd v Cooperative Retail Services Ltd [2001] L&TR 26 applied.
In the present case, it was right to assume, without deciding the point, that an unqualified demand for future rent would operate as a waiver of the right to forfeiture so that the strict rule applicable to receipt of rent would apply. The appeal could be decided on that assumption without the need to examine the more general issue. On the facts, the letters, when read together, did not make a demand for unpaid rent and other charges, but for settlement of the judgment, interest and costs that had already been awarded against the second appellant. The letter was not an unequivocal demand because it made clear that the respondent would accept the tenancy as continuing only on payment of the rent: Segal Securities Ltd v Thoseby [1963] 1 QB 887, Central Estates (Belgravia) Ltd v Woolgar (No 2) (1972) 223 EG 1273, David Blackstone Ltd v Burnetts (West End) Ltd [1973] 1 WLR 1487, Expert Clothing Service & Sales Ltd v Hillgate House Ltd [1985] 2 EGLR 85; (1985) 275 EG 1011 and Thomas v Ken Thomas Ltd [2006] EWCA Civ 1504; [2007] 1 EGLR 31; [2007] 01 EG 94 considered.
The judge had acted entirely within the proper bounds of his discretion in deciding to refuse relief from forfeiture. When the actions of the appellants, the loss they would sustain, the benefit to the respondent and the alternatives were all considered, and in the light of the exceptional facts of this case, the judge had acted fully within the ambit of his discretionary jurisdiction: Khar v Delbounty Ltd (1998) 75 P&CR 232 considered.
James Browne (instructed by the Direct Professional Access Scheme) appeared for the first appellant; Jan Luba QC and James Browne (instructed by Drummonds Solicitors, of Chester) appeared for the second appellant; Mark Warwick (instructed by Howard Kennedy) appeared for the respondent.
Eileen O’Grady, barrister
