Sylwia Jatczak and Katie Helmore address an anxious coffee shop owner’s query.
Question
I am a commercial tenant running a coffee shop. My lease is not particularly clear. There is a requirement for the tenant to provide outdoor seating for up to 50 people within three years of the grant of the lease. I thought I had complied with this by providing seating for 20 adults and a children’s play area. The landlord’s agents inspected the property a few months ago but didn’t mention anything about the seating/play area. Having recently reviewed my lease I am concerned I have not complied with the requirement to provide outdoor seating for up to 50 people. I’m up to date with my rent payments. Can the landlord terminate my lease, and how can I protect my position?
Answer
Commercial leases often include a proviso for re-entry, allowing landlords to terminate where tenant covenants have been breached, and we assume that your lease contains such a proviso. On the face of it, you appear to have breached the covenant requiring you to provide outdoor seating for up to 50 people within three years of the grant of the lease. However, you mention that the lease is not well drafted and you will need to obtain advice on exactly what is required by this covenant and whether you are in breach. Although any breach of this covenant would be a once-and-for-all breach, you would be well advised to consider complying with the covenant. If the landlord looks to forfeit your lease, you will have the right to apply for relief from forfeiture which is usually granted on terms that any breaches are remedied. You may also be able to challenge the forfeiture if the landlord has waived their right to forfeit.
Explanation
Once the landlord’s right to forfeit is established according to the lease provisions and has not been waived, forfeiture of commercial premises can occur by either peaceable re-entry (changing the locks) or by a court order. Forfeiture by either method requires notice pursuant to section 146 of the Law of Property At 1925 unless the only breach is rent arrears. Here, the landlord would first need to serve a section 146 notice on you setting out the breaches of the lease and giving you a reasonable time to remedy them (if they are capable of remedy).
However, a landlord may waive the right to forfeit by treating the lease as continuing post-breach. Waiver requires: (a) landlord’s knowledge of the breach; (b) some unequivocal act which is only consistent with the continued existence of the lease; and (c) communication of this to the tenant. For instance, accepting rent after a breach usually constitutes waiver.
Even after a successful forfeiture, you have the right to seek relief from forfeiture. This is a discretionary remedy, although the court will usually only grant relief on conditions that the breaches which led to forfeiture are remedied and on payment of the landlord’s costs.
You mentioned that the landlord may be aware of the breach in relation to the seating/children’s play area because their agents inspected a few months ago and that you have continued to pay rent. The landlord may well have waived the right to forfeit unless they have returned that rent to you promptly. In the recent case of The Tropical Zoo Ltd v The Mayor and Burgesses of the London Borough of Hounslow [2024] EWHC 1240 (Ch); [2024] PLSCS 102, the tenant was obligated to build a zoo within two years under the lease but failed to do so due to funding issues. The landlord issued section 146 notices and initiated possession proceedings. Although the tenant continued paying rent, the landlord returned it promptly, except for three occasions when the landlord’s agent delayed due to clerical errors. The court held that the agent’s role was limited to rent collection, such that acceptance of rent by the agent did not amount to a waiver by the landlord. Your landlord’s right to terminate your lease will depend on whether they have accepted rent (with knowledge of the breach) and not returned it promptly.
In another recent case, Biljani v Medical Express (London) Ltd [2024] 7 WLUK 258, a dentist had her licence suspended and began offering Botox treatments, breaching the lease terms which restricted use to registered dental practitioners. She argued her suspension did not prevent offering Botox and claimed the landlord had waived their right to forfeit. The court determined the breach was not wilful due to a genuine dispute over the lease terms and there was no harm to the landlord’s reputation and so granted relief from forfeiture. As you have only just discovered that use of the outdoor seating/children’s play area is a breach of your lease, there is an argument that, if you sought relief from forfeiture, a court would find that your breach was not wilful. However, you may need to consider complying with the covenant as soon as possible.
Sylwia Jatczak is an associate at Charles Russell Speechlys LLP and Katie Helmore is a barrister at Landmark Chambers
