Commercial landlords know that if a tenant fails to pay rent and the lease contains a forfeiture clause, the landlord can forfeit the lease by peaceable re entry i.e by changing the locks when the tenant is not in the premises. It can be a useful self-help remedy but it is limited by the tenant’s right to claim relief from forfeiture and get back into the premises if he pays the rent arrears and associated costs.
The long held belief that a tenant has about 6 months to make its claim for relief from forfeiture but is now in some doubt from the recent case of Pineport Limited v Grangeglen Limited, where the court granted relief upon an application made some 14 months after forfeiture.
For landlords of industrial premises, the facts of the Pineport case were unusual, in that the tenant had a long lease (125 years) of an industrial unit in Southall. The tenant had paid a premium of £90,000 for the lease and paid rents of £100 a year. Following forfeiture in April 2014, the tenant did not apply for relief until June 2015.
In court the landlord argued that the delay in making the application was significant and that relief should be refused for that reason. The court however said that the delay was just one of the factors to consider, rather than an initial hurdle to overcome and also took into account the following facts:
- the tenant had mental health issues which had prevented a timely remedy of the situation;
- the steps that the tenant had had to take to sell other assets to pay the arrears;
- the value of the lease compared to the outstanding arrears (£275,000/£24,000);
- the lack of prejudice to the landlord and
- the landlord’s failure to market or let the property on a new long lease.
Clearly, points 3-5 were material to the court’s consideration and its decision that the application had been made with reasonable promptitude. One can envisage a different consideration if the property had been re let or if the lease was of little value in comparison to the arrears, but yet it is still a reminder that the assumptions we make are just that. We cannot guarantee that a tenant will not succeed in a “late” relief application and this risk must always be weighed in any case of peaceable re entry. We can try to get undertakings from tenants not to proceed, although these are not a very realistic prospect and we should always push for indemnities from incoming tenants to protect the position as far as we can.
When a landlord forfeits because it has a new tenant lined up it has to explain how the premises came to be vacant. It’s in the usual CPSEs. When recent forfeiture is disclosed landlords know they have to offer an indemnity against the risk that the courts could reinstate the old lease. This request will be made for older forfeitures now. Surrenders of the lease can be a better solution in this situation if landlords can get the co-operation of their tenants.