Forfeiture is the ultimate power for a landlord.  Following a breach by a tenant, a landlord can re-enter the premises and bring the lease to an end.  From a tenant’s perspective, it is the ultimate punishment.  How can a tenant pay the rent if they have no access to their trading premises?  In order to re-dress the balance of power a tenant has the right to apply for relief from forfeiture.  But when can a tenant do this?

A recent case (Pineport Limited v Grangeglen Limited) has seemingly extended the practical time frame during which the landlord should be concerned about an application for relief from forfeiture.  There has been a general practical rule of thumb for 6 months after the date of forfeiture which has been used for many years.  It may surprise you to realise that there is a complex web of statutory provisions which differ in the county court and high court in relation to forfeiture and relief from forfeiture. However, this six month time frame comes from some of these statutory provisions. It is taken as a guide rather than a strict time limit. Of course, any right to relief will be conditional on payment of the arrears and the landlord’s costs.

Previous cases used phrases such as “reasonable promptitude” if a court was to be persuaded to exercise its equitable jurisdiction.

In Pineport, the tenant took 14 months to make a claim for relief.  The landlord forfeited on 24 April 2014.  The tenant made a claim for relief on 23 June 2015.   But the factual position was complex: the tenant director had been suffering from depression although he had also been in prison for using the premises for MOT fraud.  The landlord had not re-let the premises. And- perhaps crucially- the premises had been let on a premium and the value of the lease (approximately £275k) was disproportionate to the arrears outstanding.  This means that forfeiture essentially gave the landlord a windfall of the premium he could obtain on re-letting.

The court held that the delay had been explained and justified.

There was then a costs decision where the court held that the landlord had effectively unreasonably rejected the tenant’s offer to pay the costs to date and the arrears early on in the proceedings.  The landlord having gone to trial and failed to better the offer was penalised in costs.

Practical points

• Forfeiture is the ultimate power for a landlord but the equitable relief of the court will be used if this power is used to achieve a windfall.

• Even when costs are expressed to be recoverable on an indemnity basis under a lease, the courts will still look at the actions of the parties when coming to a costs award.

You need to bear in mind the equitable right for relief when trying to re-let premises after forfeiture. This can be complex so ask for advice if you have concerns.

by Jen Morris
Consultant (Litigation)