Leases-remedies & ending a lease

Question 1

What remedies does a landlord have available in the event of a breach of the rent covenant by the tenant?

Answer 1

Action for debt-maximum of 6 years’ arrears

Forfeiture

CRAR (Commercial Rent Arrears Recovery)

Question 2

What is Distress and Commercial Rent Arrears Recovery (CRAR)?

Answer 2

A self help remedy and may be used where the premises are purely commercial, a minimum of seven days principal rent is owed and the lease has not been forfeited.

Question 3

Describe effluxion of time as a method of ending a lease.

Answer 3

This is the usual common law way in which a lease for a fixed term comes to an end. The tenant may have security of tenure however.

Question 4

Describe notice to quit as a method of ending a lease.

Answer 4

This is the method for ending a periodic tenancy. For a yearly tenancy, either side must give at least half a year’s notice to quit.

Other period tenancies, must be determined by a full period’s notice to expire at the end of a complete period.

Question 5

Describe break clause as a method of ending a lease.

Answer 5

A lease or a fixed term may contain a provision allowing either party to service notice during its currency to bring it to a premature end.

Question 6

Describe surrender as a method of ending a lease.

Answer 6

The handing back of the lease by the tenant to the landlord with the landlord’s consent, resulting in a premature termination of the lease.

Question 7

Describe forfeiture as a method of ending a lease.

Answer 7

A right for the landlord to terminate the lease prematurely for breach of covenant by the tenant.

Question 8

Describe merger as a method of ending a lease.

Answer 8

The converse of surrender; the tenant acquires the landlord’s interest, thus becoming its own landlord and the lease is absorbed by the reversion and destroyed.

Question 9

What type of forfeiture clause is required in a legal lease?

Answer 9

There must be an express forfeiture clause in the lease allowing the landlord to forfeit the lease in the event of breach of covenant by the tenant. This is also called a legal right of re-entry.

Question 10

What type of forfeiture clause is required in an equitable lease?

Answer 10

No need for an express forfeiture clause because a right to forfeit for non-payment of rent is implied into equitable leases.

Question 11

How is the right of forfeiture exercised by a landlord?

Answer 11

Forfeiture is exercised by the landlord by either:

-peaceably re-entering the property; or

-by obtaining a Court order.

Question 12

Can a landlord forfeit where the premises are residential without a Court order?

Answer 12

No, the landlord cannot forfeit without a Court order and this includes where the premises are mixed residential and commercial.

Question 13

What are Steps 1 & 2 in the forfeiture procedure?

Answer 13

Step 1: Has there been a breach?

Step 2: Is there a forfeiture clause?

Question 14

What is Step 3 in the forfeiture procedure?

Answer 14

Step 3: Has there been a waiver?

Question 15

How might a landlord waive their right to forfeit and provide an example?

Answer 15

The landlord may do this if:

-he is aware of the acts or omissions giving rise to the right to forfeit; and

-he does some unequivocal act recognising the continued existence of the lease.

Example: demanding, accepting or suing for rent due after the breach; or distraining for rent due, despite knowing about the breach.

Question 16

How can waiver of the right to forfeit take place inadvertently?

Answer 16

Central Estates v Woolgar (1972): the landlord’s agent sends out a rent demand where the landlord is aware of the breach.

Question 17

Where there is a continuing breach such as failure to repair, how long does the waiver last?

Answer 17

Waiver only lasts until the next day the breach continues at which point the landlord can choose to reject the rent and forfeit the lease.

Question 18

Where there is a non-continuing breach, such as subletting without consent, how long does the waiver last?

Answer 18

Waiver is permanent e.g. once rent is accepted the landlord can never again forfeit for that specific breach.

Question 19

Outline Step 4-formal demand in the forfeiture procedure for breach of a rent covenant.

Answer 19

The landlord must have made a formal demand for the exact amount of rent due on the day when it becomes payable, upon the premises, between the hours of sunrise and sunset unless:

-The lease expressly waives this requirement

-At least six months’ rent is in arrears and there are insufficient seizable goods on the premises to satisfy all the arrears due

Question 20

Outline Step 5-exericse the right in the forfeiture procedure for breach of a rent covenant.

Answer 20

The landlord can proceed to exercise its right to forfeit by Court order or peaceable re-entry provided a formal demand has been served.

Question 21

How can a tenant ensure relief from forfeiture before a Court order is handed down?

Answer 21

If, on the landlord’s suing for possession, the tenant pays into Court all arrears and costs before the trial, all further proceedings are stayed.

Question 22

What is the time limit for an application for relief from forfeiture where the landlord has re-entered under a Court order?

Answer 22

The application for relief must be made within six months of re-entry and is usually given unless the circumstances are exceptional.

Question 23

When must the Court grant relief from forfeiture to a non-residential tenant after peaceable re-entry by the landlord?

Answer 23

The Court has an inherent equitable jurisdiction to grant relief if:

-the rent and landlord’s costs are paid; and

-it is just and equitable to grant relief.

Question 24

What is the effect on any sub-lease if the head lease is forfeited?

Answer 24

If a head-lease is forfeited, any sub-lease will also be destroyed.

Question 25

Can a sub-tenant apply for relief from forfeiture?

Answer 25

Yes, a sub-tenant has the right to do this and the Court has the power to vest the head-lease in the sub-tenant on such terms as it sees fit but cannot grant the sub-tenant a lease for any longer than the term of the original sub-lease.

Question 26

Outline Step 4-S146 notice in the forfeiture procedure for breach of non-rent covenants.

Answer 26

Before the landlord can forfeit, they must first serve notice upon the tenant under LPA 1925, s146.

Question 27

What must a S146 notice for breach of other covenants contain?

Answer 27

This notice must:

-Specify the breach complained of

-If capable of remedy, require it to be remedied within a reasonable time

-Require the lessee to make compensation in money for the breach if the landlord requires such compensation

Question 28

What is the test for whether the breach of a non-rent covenant is capable of remedy?

Answer 28

Whether the harm suffered by the landlord could be effectively remedied by the tenant complying with a S146 notice and making proper compensation.

Question 29

When does the Leasehold Property Repairs Act 1983 apply?

Answer 29

It applies to a covenant to repair in any lease granted for at least seven years with at least three years still to run.

Question 30

What does the Leasehold Property Repairs Act 1983 require the landlord to do?

Answer 30

It requires the landlord must inform the tenant of its right to serve a counter notice within 28 days thereby preventing the landlord from proceeding with a claim for forfeiture without first obtaining the leave of the Court.

Question 31

Outline Step 5-exercise the right in the forfeiture procedure for breach of non-rent covenants.

Answer 31

If the tenant does not remedy the breach within a reasonable time, the landlord may proceed to forfeit either by:

-peaceable re-entry; or
-by obtaining a Court order, compulsory in residential cases.

Question 32

What factors do the Court take into account when considering whether to grant relief from forfeiture to a tenant in non-rent covenant cases?

Answer 32

It generally depends on:

-how wilful and blatant the breach was
-the gravity of the breach
-landlord’s motives for wanting forfeiture
-damage to the premises
-whether the breach can be put right

Question 33

When must a tenant apply for relief from forfeiture when the landlord has exercised its right by applying for a Court order?

Answer 33

The tenant must apply for relief before the Court order is made. No further relief application is available once the court makes an executed order in favour of possession.

Question 34

Can relief from forfeiture for breach of non-rent covenants be granted if the landlord has exercised its right by peaceable re-entry?

Answer 34

Yes, relief can still be given and regard will be had to all the circumstances including the speed with which the tenant applies for relief.