A landlord who wishes to forfeit a lease must first establish that it has a right to do so. And, if such a right exists, because there is a forfeiture clause in the parties’ lease, the landlord must comply with section 146 of the Law of Property Act 1925, which requires the landlord to serve a notice on the tenant (except in the case of non-payment of rent) warning the tenant of its intentions and specifying “the particular breach complained of”. It is only following a failure by the tenant to comply with such a notice that a landlord can exercise its right to forfeit.
Toms v Rubery [2017] EWHC 2970 (QB); [2017] PLSCS 212 reminds us that the right to forfeit is contractual. Consequently, landlords should take care to ensure that their forfeiture clause actually covers the breach in question and that any preconditions to the exercise of the right have been complied with. The parties were the landlord and tenant of a public house. Following an inspection of the premises, the landlord identified several breaches of covenant. The tenant had not looked after the garden and grounds. The aluminium door of the garage was not in good condition. No test or other certificates for fire alarms and emergency lighting had been obtained. And the property had not been redecorated within the last three years.
Clause 4.1.7 of the parties’ lease provided that if the tenant was in breach of any of its covenants the landlord should serve a default notice giving the tenant 14 days to remedy the breach, and provided separately that section 146 applied. The landlord served a default notice, together with a section 146 notice, and, following a further inspection of the property, claimed that the tenant had failed to remedy all of the breaches. Was the lease liable to forfeiture as a result? The case turned on whether the section 146 notice was invalid because it was served simultaneously with the default notice.
The court agreed that the landlord had jumped the gun. The section 146 notice was served before the landlord had had a right to re-enter the premises. Consequently, the judge dismissed the proceedings for possession.
The authorities establish that section 146 must be given a common sense interpretation. It is designed to ensure that tenants fully understand what they are required to do. Furthermore, none of the authorities support the proposition that a section 146 notice may be served before the relevant right of re-entry has arisen. The section refers to “a right of re-entry or forfeiture” and requires the landlord’s notice to specify “the particular breach complained of”. This suggests that the right of re-entry must actually exist (because the section refers to “a right”, and not to “a future right”) and that the breach must actually have occurred (because a landlord cannot specify a particular breach unless it has occurred). So the landlord should have allowed 14 days to elapse after serving its default notice, before serving the section 146 notice.
The requirement for the service of a separate default notice may be unusual. But the decision confirms that a section 146 notice will be invalid if a breach of covenant is alleged, but a right to re-enter as a result of the alleged breach has not yet arisen.
Allyson Colby, property law consultant
