Termination of Leases Flashcards
Termination
- Expiry of a fixed term
- At the expiry of a fixed term the lease comes to an end. A tenant who stays in occupation after that time is a trespasser
- Surrender by a tenant
- Notice to quit
- Forfeiture for breach of covenant
- Merger
Surrender by a tenant
- This cannot be a unilateral act – the landlord must consent to the surrender
- It is for the tenant to show the landlord unequivocally accepted the surrender in order to avoid liability under the lease [Relvok Properties v Dixon]
- In Bellcourt Estates v Adesina, Megarry LJ ruled that: “Abandonment of the premises by the tenant without more (even if rent is unpaid) is not a surrender, because the landlord may wish the tenant’s liability to continue. Not is the delivery of the key of the premises to the landlord enough by itself. Even if he accepts it, _it must be shown that he did so with the intention of determining the tenancy_ … and not merely because he had no alternative”
Notices to quit
Depends on the type of tenancy
Common law tenancies require notices to quit
Assured Shorthold Tenancies governed by the s2.1 Housing Act 1988
Business tenancies by LTA 1954
Notices to quit
Analysis
Governs common law tenancies that are not protected by any statute
Applies to periodic tenancies where there is no fixed term, or if the fixed term has ended
Must be in writing and contain prescribed information [s5(1a) Protection from Eviction Act]
Governed by Notice to Quit Regulations
Must be at lease 4 weeks’ notice if governed by s5(1)
Appropriate notice period may be provided in tenancy agreement or may be longer (i.e. quarterly if rent is paid quarterly)
Forfeiture
- Provides the landlord with security for performance of the terms of the lease
- The courts can “lean against forfeiture” and if the tenant remedies the breach they will be able to obtain relief against forfeiture
- The effect is to bring the tenancy, and all its interests, to an end so that the landlord is immediately entitled to possession [Official Custodian for Charities v Mackey]
- If the tenant wishes to retain possession he must apply for relief
- As the act of forfeiture brings the tenancy to an end, the landlord ceases to be entitled to rent and may not rely on the tenant’s covenants
- Forfeiture is the termination of a tenancy for breach of a covenant in the lease
- Almost all leases contain forfeiture clauses, with a right of re-entry attached for breach of covenant
Process for terminating a tenancy by forfeiture
- Identify the breach
- Obtain a determination of breach
- if it is a residential long lease (i.e. more than 21 years), use s168 Commonhold and Leasehold Reform Act
- serve notice under s146 LPA, requiring the breach to be remedied within a reasonable time
- if the breach if not remedied (or capable of remedy), serve proceedings for a possession order or take possession without an order (commercial premises only)
- Tenant must seek relief from forfeiture for the lease to continue
Forfeiture for breach of covenant
Can then serve a notice under s146 LPA
S146 notice requires tenant to remedy the breach if possible
Failure to remedy results in possession proceedings
For long residential leases (i.e. leases with a term of more than 21 years) there is an initial statutory step. The landlord must first seek a determination that the lessee is in breach of covenant [s168 of the Commonhold and Leasehold Reform Act 2002]
Non-payment of rent
- S146 does not apply [s146(11)]
- Most modern leases contain a clause excluding the requirement for a formal demand for rent
- Where rent in arrears by 6 months or more, no formal demand needed [s210 Common Law Procedure Act]
- There is the right to apply for relief within 4 weeks of possession date [s138 Country Courts Act]
- It is also possible for leases to reserve other payments, such as the service charge, as rent in order to take advantage of the provisions of s146(11)
- This is subject to two conflicting decisions of the Court of Appeal in relation to residential leases, only
Escalus Properties v Robinson
FACTS
FACTS: a case concerning s138 Country Court Act and whether a tenant was entitled to automatic relief from forfeiture for non-payment of rent under that section
Escalus Properties v Robinson
HELD
- The service charge was payable as additional rent
- Norse LJ found that that was sufficient to clothe in with the character of rent so as to be able to rely on s138
- If it had simply been a service charge and no more, then relief would have been a discretionary remedy of the court under s146(2)
- Norse LJ said that where the terms of the lease provide that the service charge should be payable as additional rent, it “invests the charge with the character of rent”
- Where the service charge is reserved as rent, it is deemed rent
- By treating the service charge as rent, s146(11) would mean that no notice was required before forfeiture
Freeholders of 69 Marina
Even where service charges are reserved as rent, there must still be a determination that they are due pursuant to s81 HA
Sir Andrew Morritt interpreted s81 as requiring the service of a notice under s146 LPA, even though no explicit provision exists
Conflict between Freeholders and Escalus
There is a direct conflict between these two Court of Appeal cases
Landlords of residential properties are advised to serve / get a determination under s81 that the service charge is due and serve a s146 notice, even where it is reserved as rent
Relief from forfeiture
- T can apply for relief from forfeiture of the lease
- Sub-tenants and mortgagees can also apply [s146(4) LPA]
- Right is automatic in the case of forfeiture for rent arrears [s138 CCA]
- All other cases, relief is at the discretion of the Court
- Relief can be applied for in the case of residential leases whilst possession proceedings are still ongoing and in the case of commercial property, after the landlord has peaceably re-entered
- The court can also grant relief to a licensee who has been granted proprietary or possessory rights [Manchester Ship Canal Company v Vauxhall Motors]
- The Court has the “widest discretion to grant relief” [Chatham Empire Theatre v Ultrans]
Gibbs v Lakeside Developments
FACTS
Ms Gibbs (the tenant) held a 999-year lease of a flat. In 1990 she went to work abroad but returned in 1999. She gave her parents’ address as a correspondence address to the landlord’s managing agent. She paid the sums demanded by the landlord between 1990 and 2006 but stopped thereafter.
In 2009 the landlord issued a claim for arrears of rent and insurance premiums and served it at the flat. This was not good service because it was not the tenant’s last known address. Nevertheless, the landlord secured judgment in default and issued possession proceedings, which were again incorrectly served at the flat.
The landlord obtained a possession order on 24 February 2010 and re-entered the premises on 28 April 2010. The flat was marketed for sale from June 2011. The tenant found out about the foregoing in or around July 2011, when she discovered the flat was being marketed for sale.
She wrote to the solicitors for the landlord and the agents who were marketing it for sale. The solicitors replied saying they were not instructed; and the agents ignored the correspondence on instructions.
The tenant instructed solicitors in October 2011, who applied to HM Land Registry to enter a caution against the title. Although the fee was cashed, no notice was ever registered. On 21 October 2011, the tenant’s solicitors applied for relief against forfeiture and to set aside the possession order.
No application for an injunction was ever issued to prevent the sale. On 15 December 2011, the landlord granted a new long lease of the property to a third party, who had no notice of the dispute with the tenant.
The application for relief was adjourned on 6 January 2012 in light of the sale and the tenant amended her claim to add a claim for unjust enrichment against the landlord.
The trial judge (DJ Parfitt, as he then was) found the tenant had effectively abandoned the application for relief against forfeiture and to set aside the possession order at the date of the trial, which was upheld on the first appeal
Gibbs v Lakeside Developments
TIME LIMITS
- Statute regulates the time limits placed on tenants when they seek relief against forfeiture in the Country Courts Act 1984
- The High Court has an inherent jurisdiction in equity to grant relief beyond those strict time limits
- The conclusion reached in Gibbs is that, while the court has an equitable jurisdiction to grant relief beyond the time limits set by statute, it is not “without limit of time”
- “Concurrent equitable jurisdiction can only be invoked by those who apply with reasonable promptitude. What is reasonable will depend on all the circumstances, having regard to the statutory relief is limits”
- Lewison LJ says the width of the equitable jurisdiction to grant relief is narrow
- In the future, it seems tenants who do not apply for relief against forfeiture within 6 months face an almost insurmountable task to persuade the court it ought to grant relief
- This will be seen as a regrettable and retrograde step by the CoA in restricting access to the equitable relief available to the owner of a lease with a term of 999 years
