Albany Holdings Ltd v Crown Estates Commissioners [2003] EWHC 1480 (Ch); [2003] PLSCS 213 has provided some helpful guidance on what length of time can be deemed to be “reasonable” in allowing a tenant to remedy a breach of covenant before being able to forfeit a lease.
As is well known, the Law of Property Act 1925 requires that a landlord seeking to forfeit a lease (other than for non-payment of rent) must serve a section 146 notice setting out:
the breach;
the requirement that the breach is remedied if possible; and
the amount of compensation, if desired.
The period within which the tenant must remedy the breach is not normally specified in the notice, and it was this point that the court was asked to decide.
The case concerned a covenant in a lease whereby the property was to be used only as offices. The tenant had allowed a third party to occupy the property under a licence, which included the term that the third party was also to use the property as offices. However, the licensee set up a computing college and language school. Under the terms of the licence, it could be terminated if a breach were not remedied within two months.
On discovering the breach, the landlord issued a section 146 notice. The tenant sought an injunction and damages, arguing that the reasonable period for compliance with the notice should be two months, since this was the period stipulated in the licence.
The court held that the reasonableness of the compliance period should be based on the terms agreed between the landlord and the tenant, and not those that the tenant had negotiated with a third party, because that would allow the tenant to better its position. The court further ruled that one month was a reasonable compliance period, since this would provide sufficient time for the tenant to take the third party to court in order to ensure that it complied with its obligations under the licence. The tenant therefore failed in its claim.
This case provides us with useful guidance on what has, until now, been a grey area.
Scala House & District Property Co Ltd v Forbes [1974] QB 575 established that even where a breach is irremediable, the landlord must allow a minimum period, say 14 days, within which the tenant could consider its position.
Albany Holdings indicates that it is reasonable to impose a maximum time limit of one month in the case of a “normal” breach.
The time limit may be different in special cases, such as where works to resolve the breach would take several months. The case also serves as a warning against agreeing underleases or underlicences that entitle an occupier to a period within which to remedy breaches of longer than one month.
Alex Seton is a solicitor in the property department at Manches.
Albany Holdings Ltd v Crown Estates Commissioners [2003] EWHC 1480 (Ch); [2003] PLSCS 213 has provided some helpful guidance on what length of time can be deemed to be “reasonable” in allowing a tenant to remedy a breach of covenant before being able to forfeit a lease.
As is well known, the Law of Property Act 1925 requires that a landlord seeking to forfeit a lease (other than for non-payment of rent) must serve a section 146 notice setting out:
the breach;
the requirement that the breach is remedied if possible; and
the amount of compensation, if desired.
The period within which the tenant must remedy the breach is not normally specified in the notice, and it was this point that the court was asked to decide.
The case concerned a covenant in a lease whereby the property was to be used only as offices. The tenant had allowed a third party to occupy the property under a licence, which included the term that the third party was also to use the property as offices. However, the licensee set up a computing college and language school. Under the terms of the licence, it could be terminated if a breach were not remedied within two months.
On discovering the breach, the landlord issued a section 146 notice. The tenant sought an injunction and damages, arguing that the reasonable period for compliance with the notice should be two months, since this was the period stipulated in the licence.
The court held that the reasonableness of the compliance period should be based on the terms agreed between the landlord and the tenant, and not those that the tenant had negotiated with a third party, because that would allow the tenant to better its position. The court further ruled that one month was a reasonable compliance period, since this would provide sufficient time for the tenant to take the third party to court in order to ensure that it complied with its obligations under the licence. The tenant therefore failed in its claim.
This case provides us with useful guidance on what has, until now, been a grey area.
Scala House & District Property Co Ltd v Forbes [1974] QB 575 established that even where a breach is irremediable, the landlord must allow a minimum period, say 14 days, within which the tenant could consider its position.
Albany Holdings indicates that it is reasonable to impose a maximum time limit of one month in the case of a “normal” breach.
The time limit may be different in special cases, such as where works to resolve the breach would take several months. The case also serves as a warning against agreeing underleases or underlicences that entitle an occupier to a period within which to remedy breaches of longer than one month.
Alex Seton is a solicitor in the property department at Manches.
