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Commercial Landlords beware!

Relief from Forfeiture can be successful after 14 months delay

Forfeiture of commercial properties can seem far more straightforward than those of residential. In particular, the ability to use peaceable re-entry means that landlords can evict tenants without the need to use court.

A commercial tenant’s right to make an application for ‘relief from forfeiture’ provides balance to the process.

In particular where peaceable re-entry has been used, the landlord finds themselves in purdah after the forfeiture has taken place. Whether the evicted tenant will make an application for relief from forfeiture must play on the mind of the landlord in deciding the time to re-let the premises.

The general guideline is that six months is an important timeframe for the landlord and tenant when it comes to making an application for relief.

Time frame to apply for relief from forfeiture for arrears of rent:

Where there has been forfeiture by a peaceable re-entry, the court has the power to grant relief.  The six month limit prescribed by s.210 of the CLPA 1852 does not apply but will be taken as a guide rather than a strict time limit.

Where forfeiture for non-payment of rent has taken place by way of proceedings, there is even greater significance for the six month period. The court has the power to grant relief in a summary manner, provided the tenant pays rent arrears and the costs of covering those arrears.  Where there is at least six months’ rent in arrears, if the tenant pays all of the arrears and costs before the trial of the landlord’s possession claim, proceedings are automatically discontinued and the tenant holds the property without any need for a new lease.

Where there is at least six months’ rent arrears, the tenant has six months after execution of the order for possession to obtain the relief, on condition the tenant makes payment of the rent arrears and all costs and interest incurred by the landlord. The court can still refuse relief during the six months’ period if it would be inequitable to grant relief; and where there is less than six months’ rent arrears, the six month limit prescribed by s.210 of the CLPA 1852 will be taken as a guide rather than a strict time limit. 

Recent case:

The significance of the case of Pineport Limited v. Grangeglen Limited [2016] EWHC 1318 (Chancery) is that a significant time after forfeiture took place, a successful application for relief from forfeiture was made by the tenant.

A full 14 months after forfeiture had taken place an application was made by the tenant and relief granted by the court. The court acknowledged there was a lengthy delay but decided on the facts of the case that it was appropriate to grant relief.

It is clear that every case will be considered on its own merits.  However, it is useful to see the particular areas considered by the court in deciding why a 14 month delay did not undermine an application of the director of the tenant company.

Reasons for the decision:

The court concluded that although the delay may ultimately be a decisive factor, it was wrong to deal with the issue in isolation without regard to all the circumstances. The court’s decision whether to grant relief from forfeiture is a broad one and the conclusion should follow from a review of the individual facts. Therefore, the court considered the circumstances must be taken into account against all the relevant issues rather than treating the case as a series of thresholds for the tenant to surmount with delay being the first of them.

The court held as a condition the tenant would have to pay the arrears and the landlord’s costs plus interest within a reasonable period. They looked into the ability of the director/tenant to be able to meet this criteria. In consideration of the tenant’s brother selling this flat, the court concluded the sale proceeds would be sufficient to pay the sum of £24,530.00 which was payable.

Although there had been illegal activity which took place on behalf of the tenant at the premises and there is a conclusion of the events being moderately severe, the court did not consider the illegal activity fell within the exceptional category as set out in the case of Gill v. Lewis to prevent forfeiture being granted.

The lease had been granted for a substantial premium at ground rent. This was considered to be an important factor in deciding whether relief would have been granted.  There would have been different considerations in relation to a rack rent lease. The court also took into account whether there was any prejudice against the landlord from non-payment of rent. On this occasion the landlord had not been able to point to any prejudice suffered, nor was any third party prejudiced against. There had been no re-letting of the premises.

The court also took into consideration the director had suffered from depression and had not obtained specialist legal advice until after a significant time lapse.  

As such, the case can be looked at in isolation as setting out particular circumstances which have allowed the relief of forfeiture to be successful which are rare. However, I consider the relevant point to take away from this is that the court has significant discretion when making a decision on relief from forfeiture. It is important not to take for granted that an application for relief from forfeiture will necessarily fail if it is started six months after forfeiture has taken place.

If you would like advice please contact our Dispute Resolution team.