Tenants seeking relief against forfeiture generally have to comply with strict time limits laid down by statute. So the tenant’s application might not have appeared all that promising in Pineport Ltd v Grangeglen Ltd [2016] EWHC 1318 (Ch); [2016] PLSCS 172, given that it had delayed for 14 months before applying for relief. However, the judge was satisfied that it would be wrong to refuse the tenant’s application, which was made under the court’s equitable jurisdiction, in this particular instance.
The case concerned the forfeiture of a 125-year lease of premises on an industrial estate, which were used as an MOT garage and workshop. The lease had been granted in return for a premium of £90,000 and the leasehold interest was valued at £275,000. The landlord re-entered the premises on 24 April 2014 because there were arrears of service charge in the sum of £2,155, but the tenant did not seek relief from forfeiture until 23 June 2015.
It emerged that the tenant had issued MOT certificates without following the correct procedure and that the company’s director had been sent to prison. The individual concerned had been diagnosed with depression, which had affected his ability to cope with his business affairs, as did the fact that he had been imprisoned. He gave evidence that he did not understand the law of forfeiture and did not imagine that his company could lose the unit until the Land Registry notified him that the leasehold title would be closed.
The tenant had deposited £2,155 with the company’s solicitors to discharge the arrears of service charge. In addition, a family member was willing to sell one of his own properties to fund the additional £24,530 needed to cover costs incurred by the landlord on management, insurance and security since the date of forfeiture – and it was likely that the money would be available within 12 to 16 weeks.
The judge stated that the High Court has power in equity, independently of statute, to grant relief from forfeiture, but accepted that the tenant had a significant obstacle to overcome because the court will not normally exercise its jurisdiction to grant relief if a claim is stale. A fourteen month delay came close to the tipping point. However, the judge was satisfied that it would be wrong to deny the tenant relief in this case.
When dealing with forfeiture for non-payment of rents, the court will usually grant relief if all sums due, including any other losses or expenses incurred by the landlord, are paid up – and should not take account of extraneous breaches of covenant save in exceptional circumstances. The tenant had lost its licence to grant MOT certificates. However, there was no real risk of the conduct being repeated and the judge did not consider this to be a relevant factor.
The tenant had explained why its application for relief had been delayed. The landlord had not taken any steps to re-let the premises and nothing had happened in the meantime that would cause the landlord any prejudice or greater hardship than would be caused by denying the tenant’s application for relief. Furthermore, the landlord would obtain a disproportionately large windfall if the application were to be refused.
Allyson Colby is a property law consultant
