Lease — Arrears of rent — Forfeiture of lease — Tenant company going into administration — Administrators offering to surrender lease — Premises vacated — Keys returned to landlord and accepted — Forfeiture proceedings threatened but never commenced — New lease of premises granted to third party — Application to court for declaration that lease had been forfeited or whether still valid and subsisting — Companies court holding that landlord had asserted right to re-enter by giving new lease to third party — Landlord not entitled later to claim that lease still in existence — Application dismissed
On January 9 1991 AGB Research plc (“the company”) became tenant of Audley House, North Bridge Road, Berkhamstead, Hertfordshire, under a lease for a term of 25 years from December 25 1990 at a rent of £175,000 pa plus insurance and VAT. The lease contained a proviso for re-entry giving the landlord the right to forfeit after rent was unpaid for 14 days. On August 13 1991 the freehold reversion in the property was transferred to the applicant landlord, which was registered as proprietor. On December 6 1991 joint administrators of the company were appointed. The rent was paid up to May 24 1992 but not thereafter and the company vacated the property in May/June 1992. In June the administrators offered to surrender the lease and the keys were handed to the applicants on July 26 1992. Discussions continued for the surrender of the lease, but nothing was concluded when on November 10 1992 the applicants granted a lease of the premises to a third party for 25 years from November 10 at £175,000 pa with a six-month rent-free period plus reverse premium of £108,000 and contribution to the tenant’s works. Soon after, the administrators’ offer to surrender the 1991 lease for a premium was rejected and forfeiture proceedings were threatened, but never commenced. A dispute arose between the administrators and the applicant as to the latter’s right under a voluntary arrangement at a meeting of the company’s creditors. An issue arose whether the 1991 lease had been forfeited by the applicant. The applicant sought, among other things, a declaration from the court that the 1991 lease was still valid and subsisting.
Held The application was dismissed.
1. The right of re-entry existed by reason of the company’s failure to pay the June and September quarters’ rent due under the lease.
2. The requisite intention to forfeit was presumed where an act by the landlord was unequivocal, as in this case where the landlord entered into a new lease with a third party. Where a landlord with a right to forfeit unequivocally did an act inconsistent with the lease continuing, such as taking possession, it was not open to him to say later that he did not intend to forfeit.
3. The applicant had sought to argue that there was no forfeiture by the grant of the 1992 lease which took effect in reversion. But that was inconsistent with the right of the third party under the 1992 lease to carry out repairs and alterations to the property.
4. The administrators had made it clear that they wished to surrender and did all they could to give back possession (by vacating, returning the keys and communicating an unequivocal desire to surrender to the landlord). By retaking the property thereafter and stating that they had taken possession, the landlord was estopped from denying the determination of the lease.
Nicholas Patten QC (instructed by Halliwell Landau, of Manchester) appeared for the applicant landlord; David Neuberger QC and Susan Prevezer (instructed by Allen & Overy) appeared for the respondent administrators.
