Landlord and tenant – Forfeiture of lease – Re-entry – Respondent tenant falling into arrears of rent – Appellant landlords exercising mechanism for recovery of statutory commercial rent arrears – Appellants purporting to forfeit lease by re-entry – County court ruling purported forfeiture unlawful – High Court upholding decision – Appellants appealing – Whether appellants waiving right of forfeiture by exercising statutory mechanism – Appeal dismissed
By a lease dated 10 July 2013, the appellant landlords leased to the respondent tenant commercial retail premises at 101 Stanley Road, Teddington, Middlesex. When the respondent fell into arrears of rent, the appellants instructed an enforcement agency to recover the arrears using the right of the landlord to effect the statutory mechanism for commercial rent arrears recovery (CRAR) under section 72(1) of the Tribunals, Courts and Enforcement Act 2007. The enforcement agents duly exercised the statutory mechanism over the respondent’s goods and the arrears were paid by the respondent to the enforcement agents who passed the sum on to the appellants. Shortly after the funds were paid but before they were received, the appellants, as the persons entitled to the reversion on the lease, purported to forfeit the lease by re-entering the property.
The respondent sought a declaration that the appellants’ purported forfeiture of the lease was unlawful, damages for trespass and/or breach of covenant and damages for conversion of goods. It claimed that there were no arrears outstanding and that, by exercising the statutory mechanism for commercial rent arrears recovery (CRAR), the appellants had unequivocally acknowledged the continued existence of the lease and waived their right to forfeit it for non-payment of rent previously due. No further sums had fallen due to justify forfeiture. The county court held that the purported forfeiture of the lease was unlawful because the appellants had waived their right of forfeiture by exercising CRAR. The High Court upheld that decision: [2018] EWHC 2461 (Ch); [2018] EGLR 43.
The appellants appealed. The central issue was whether a lessor’s exercise of CRAR pursuant to the 2007 Act waived the lessor’s right to forfeit the lease for arrears of rent then outstanding.
Held: The appeal was dismissed.
(1) While CRAR was a statutory remedy and common law distress no longer existed, waiver of forfeiture was a common law principle, the conditions of which had not been altered with the statutory introduction of CRAR. Waiver of forfeiture was an irrevocable election. The court rejected the appellant’s argument that, whatever the consequence at common law of levying distress on the lessor’s right to forfeit, the exercise of CRAR was not of itself an unequivocal act, manifesting a concluded decision to affirm the existence of the lease; rather it was a neutral act, because CRAR would continue to be exercisable up to six months after the end of a lease if the conditions in section 79(4) of the 2007 Act applied. Appraisal of whether or not the lessor had done an unequivocal act manifesting a concluded decision to affirm the lease was straightforward and did not require postulating the kind of hypothetical parallel world suggested by the appellant, in which a lease had ended, and asking whether the act or acts asserted by the tenant to have been a waiver could only have been done during the continuance of the lease or could have been done even if the lease had ended. There was no authority for any such approach. The effect of section 79(4)(a) of the 2007 Act was that CRAR could never be exercised when a lease had been brought to an end by forfeiture. Accordingly, because the general scenario being considered was one where a lessor wished to forfeit the lease, even if appropriate, any imaginary world would have to be one in which the lease had come to an end by forfeiture and so there could be no post termination CRAR. In the present case, when CRAR was purportedly exercised by the appellants, forfeiture was the only way of bringing the lease to an end as it had many years to run and was not excluded from the protection of the Landlord and Tenant Act 1954. The existence of a statutory power to exercise CRAR after a lease had ended otherwise than by forfeiture could not logically throw any light on whether the exercise of CRAR before the lessor had purported to forfeit the lease waived the right to forfeit. Since CRAR could only be exercised by a lessor and, by virtue of section 79(4)(a) of the 2007 Act, could not be exercised after termination of the lease by forfeiture, CRAR in principle amounted to an unequivocal act confirming the lessor’s decision to affirm the continuation of the lease, just as was the levying of distress at common law: Central Estates (Belgravia) Ltd v Woolgar (No 2) [1972] 1 WLR 1048 followed.
(2) Section 210 of the Common Law Procedure Act 1852 authorised the lessor, where there was six months or more rent in arrear, to forfeit the lease, without formal demand or actual re-entry, by the service of proceedings for possession. Distress, and by parity of reasoning, now the exercise of CRAR, operated at common law to waive forfeiture in all cases but section 210 provided the lessor with a statutory defence to a claim of waiver should the lessor subsequently bring proceedings for possession pursuant to that section. The appellant’s argument that, prior to the introduction of CRAR, where the rent was six months or more in arrears, the levying of distress by the lessor would not waive the lessor’s right to forfeit the lease in the way permitted by section 210 since the section itself presupposed that distress had been levied but was insufficient, was not seriously arguable: Brewer (on the demise of Lord Onslow) v Eaton (1783) 3 Douglas 230; 99 ER 627 considered.
(3 The judge had been entitled to proceed on the footing that the appellants instructed the enforcements agents to effect CRAR and the respondent knew that CRAR had been commenced by the appellants by the presence of the enforcement agents on the property. Even if the appellants could have argued that CRAR was never exercised because of the failure to serve notice pursuant to para 7(1) of Schedule 12 to the 2007 Act, the entry of the enforcement agents on the property and the seizure of the respondent’s goods in purported exercise of CRAR was a waiver of forfeiture.
Timothy Cowen (instructed by Richmond and Barnes Solicitors, of Teddington) appeared for the appellants; Aaron Walder (instructed by Yorks Solicitors, of Ilford) appeared for the respondent.
Eileen O’Grady, barrister
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