Landlords seeking to forfeit commercial leases for rent arrears are not required to serve section 146 notices requiring their tenants to pay up – and, if there is no one in the premises at the time, can physically re-enter the property and bring the lease to an end, without having to apply to the court first. But the tenant will be entitled to apply for relief from forfeiture, in which case the court has jurisdiction to grant relief on terms that will typically include payment of the arrears in question, as well as the landlord’s legal fees and any other associated costs.
Keshwala v Bhalsod [2020] EWHC 2372 (QB) concerned the forfeiture of a lease of a shop, with living accommodation above, in Leicester city centre. Unfortunately, the travel agency operating out of the premises failed. One of the tenants then spent significant sums of money refurbishing the premises with a view to opening a hairdressing business in the property instead and entrusted the payment of the quarterly rent of £2,000 to his sister. Unfortunately, she mistakenly paid only £1,500 in June 2018, leaving the rent £500 in arrears.
The mistake was not appreciated by anyone, except the landlord, who forfeited the lease (which still had 10 years left to run) by peaceable re-entry in September 2018. The commercial parts of the premises were re-let on a three-year lease at the beginning of the following February, and the residential parts were let separately to assured shorthold tenants, at an increased rent of £14,700 per annum.
The tenants applied for relief from forfeiture soon afterwards. But Leicester County Court rejected the application. Despite accepting that it was “harsh business practice to forfeit for… what is a fraction of the rent, when your agent has already furnished the invoice for the following quarter’s rent without making any reference to the arrears and without giving the tenant any notice of what you are about to do”, the judge felt that the tenants’ inactivity between October and January had not been sufficiently explained. Had the application been made promptly, it would have been granted. But the court’s equitable jurisdiction to grant relief from forfeiture effected by peaceable re-entry is available only to those who apply with “reasonable promptitude” and the delay in seeking relief made it inappropriate to grant relief in this case.
The High Court has overturned the decision. In Billson v Residential Apartments Ltd [1992] 1 AC 494, Nicholls LJ indicated that “reasonable promptitude” will depend on all the circumstances “having due regard to the statutory time limits”. And, after reviewing the authorities, the judge concluded that an application brought within the six-month period available under statute is to be taken as having been brought with “reasonable promptitude”.
Save in exceptional circumstances, equity consistently relieves against forfeiture where the tenant pays the rent and all expenses. And the delay in seeking relief in this case, which was less than six months, did not amount to an exceptional circumstance that would justify a refusal to grant the relief sought. The residential parts of the premises were now vacant. And the tenants had indicated that they would be content with a reversionary lease of the ground floor. Consequently, the re-letting of the premises was not a bar to granting the tenants’ application for relief from forfeiture in this case.
Allyson Colby, property law consultant
