Chapter 10: Landlord’s remedies and ending a lease

Question 1

1. Landlord’s remedies

Answer 1

Leases are drafted in a prohibitory or negative manner setting out what the tenant cannot do by
way of a number of tenant covenants. What happens then if the tenant breaches a covenant in the lease? What can the landlord do?
We will now explore the options available to a landlord in the event of a tenant breach

Question 2

1.1 Breach of a rent covenant

Answer 2

The landlord has the following remedies available to it in the event of a breach of the rent covenant by the tenant

Question 3

1.1.1 Forfeiture

Answer 3

This involves bringing the lease to a premature end because of the tenant’s breach.

Question 4

1.1.2 Action for debt

Answer 4

The tenant can be sued on its covenant to pay rent. A landlord can only recover six years’ arrears. However, if a tenant is unable to pay the rent, it is unlikely to be able to pay any damages awarded by the court. This remedy may not, therefore, be the most practical for a landlord to pursue.

Question 5

1.1.3 Distress and Commercial Rent Arrears Recovery (CRAR)

Answer 5

Distress was an ancient common law self-help remedy, entitling a landlord to enter the premises as soon as the rent was due and unpaid and to take possession of goods to the value of the rent owed. If the tenant did not then pay within five days, the goods could be sold.

From 6 April 2014, a landlord’s right to levy distress for rent arrears was abolished and replaced with a new regime known as Commercial Rent Arrears Recovery (CRAR). This requires a landlord to serve an enforcement notice on the tenant giving seven clear days’ notice that it will seize goods.

Question 6

1.1.3 Distress and Commercial Rent Arrears Recovery (CRAR)

Answer 6

Once notice has been served, the tenant can apply for it to be set aside or for its execution to be
delayed. There must be a minimum of seven days’ rent arrears in order to use this procedure, and
the remedy is not available in respect of mixed use or residential premises.
The notice requirements clearly reduce the effectiveness of the remedy from a landlord’s
perspective because tenants have the opportunity to remove goods from the premises and put
them out of the landlord’s reach.

Question 7

1.2 Breach of a non-rent covenant

By their nature, breaches of other types of covenant than rent (eg repair covenant) require a wider range of remedies, as follows:

Answer 7

1.2.1 Injunction

The landlord could ask the court for an order to stop the tenant breaching the lease. For example,
to stop a breach of the user provisions, or to prevent an unauthorised sublease or assignment.

Question 8

1.2.2 Forfeiture

Answer 8

This involves bringing the lease to a premature end because of the tenant’s breach.

Question 9

1.2.3 Specific performance

Answer 9

The landlord could ask the court for this equitable remedy, to force the tenant to do something eg
repair the premises. However, is very rarely ordered by the court in these circumstances; damages will usually be considered adequate

Question 10

1.2.4 Damages

Answer 10

A lease is a contract and if a tenant is in breach of a covenant, it is in breach of contract and the
landlord can sue for damages. The ordinary contractual rules as to the measure of damages will generally apply.

Question 11

1.3 Summary

Answer 11

• In the event of a breach by the tenant of a rent covenant, the following remedies are available
  to a landlord:
• Action for debt
• Forfeiture
• Forfeiture is a right to end the tenant’s lease in the event of a breach.
• Distress is an ancient common law remedy that has been abolished.

Question 12

1.3 Summary

Answer 12

• Commercial Rent Arrears Recovery may be available as a remedy to a landlord in the event of breach of a rent covenant where the premises let are commercial. Seven days’ notice must be served on the tenant.
• If the tenant is in breach of another covenant in the lease, the following remedies are also available to a landlord:
• Injunction
• Specific performance (though this will be very rarely granted)

Question 13

2 Forfeiture

2.1 Introduction

Answer 13

Most people would assume that leases only come to an end when the term of the lease expires.
This is certainly one of the primary ways in which a lease can end, but it is by no means the only method. One way in which a lease can end early is if a landlord exercises a legal right of re-entry, which is more commonly called a forfeiture right. This is a right for the landlord to terminate the lease prematurely for breach of covenant by the tenant. This is a very powerful right.

Question 14

Legal right of entry

Answer 14

In a legal lease, the forfeiture clause creates a legal right of re-entry (one
of the five legal interests listed in LPA 1925, s 1(2)). A forfeiture clause is therefore also known as a re-entry clause.

Question 15

2.1.1 Legal leases

Answer 15

There must be an express forfeiture clause in the lease allowing the landlord to forfeit the lease in
the event of breach of covenant (or insolvency) by the tenant. Every well-drawn lease should contain a forfeiture clause as the right to forfeit is never implied into a legal lease.

Question 16

2.1.2 Equitable leases

Answer 16

There does not need to be an express forfeiture clause, because a right to forfeit for non-payment
of rent is implied into equitable leases as one of the implied usual covenants.

Question 17

2.2 Exercising the right

Answer 17

Forfeiture is exercised by the landlord by either:
(a) Peaceably re-entering the property; or
(b) By obtaining a court order.
There are then different rules, depending on whether the landlord is forfeiting for non-payment of
rent or for breach of covenant other than non-payment of rent. However, the methods of forfeiture
(court order or peaceable re-entry) apply to both types of breach.

Question 18

In the case of pure business premises

Answer 18

In the case of pure business premises, the landlord may forfeit by peaceable re-entry ie by
physically entering, changing the locks and putting up an unequivocal notice that it is forfeiting
the lease. Where the premises are residential, the landlord cannot forfeit without a court order (Protection from Eviction Act 1977, s 2). This includes where the premises are mixed residential and commercial (Patel v Pirabakaran [2006] 1 WLR 3112).

Question 19

2.3 Waiver

Answer 19

If the landlord wishes to forfeit, it must not have waived its right to forfeit. The landlord may waive the right to forfeit if:
(a) It is aware of the acts or omissions giving rise to the right to forfeit; and
(b) It does some unequivocal act recognising the continued existence of the lease.
Waiver operates only on the landlord’s right to forfeit. The landlord retains other remedies

Question 20

Example of waiver

Answer 20

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

Question 21

Assessment focus point

Answer 21

The rules relating to waiver apply to breach of rent covenants and breach of other types of covenant.

Question 22

Example of waiver

Answer 22

Waiver can take place inadvertently. For example, if the landlord’s agent sends out a rent demand where the landlord (though not the agent) is aware of the breach (Central Estates
(Belgravia) Ltd v Woolgar [1972] 1 WLR 1048).

Question 23

2.3.1 Impact of waiver - continuing breaches

Answer 23

Where there is a continuing breach (eg failure to repair), waiver only lasts until the next day the breach continues at which point the landlord can then choose to reject the rent and forfeit the lease. The impact of waiver of a continuing breach can therefore be minimal.

Question 24

2.3.2 Impact of waiver - non-continuing breaches

Answer 24

If the breach is non-continuing (‘once and for all’), such as sub-letting without consent, waiver is
permanent, ie once rent is accepted the landlord can never again forfeit for that specific breach. Waiver can operate in relation to a breach of covenant to pay the rent; the landlord could for example waive the right to forfeit for failure to pay the previous month’s rent, by demanding the next month’s rent.

Question 25

2.3.2 Impact of waiver - non-continuing breaches

Answer 25

Non-payment of rent is classified as a non-continuing breach (London and County (A&D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764). This means that each individual non-payment of rent (ie each missed payment) is deemed to be a separate breach, creating a separate right to forfeit. So, even if the landlord permanently waives its right to forfeit for one incidence of non-payment of rent, this does not preclude the possibility that the landlord could forfeit for another non-payment of rent in the future (which is a likely possibility in such circumstances).

Question 26

2.4 Forfeiture for non-payment of rent

Answer 26

Before the landlord can exercise its right to forfeit for non-payment of rent, it 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; or
* At least six months’ rent is in arrears and there are insufficient distrainable (ie seizable) goods
on the premises to satisfy all the arrears due.

Question 27

Assessment focus point

Answer 27

A lease will usually waive the requirement that the rent be formally demanded by including in
the forfeiture or rent payment clause words such as ‘whether formally demanded or not’. Therefore, providing the tenant is in arrears of rent and assuming the landlord has not waived its right, the landlord can proceed to exercise its right by court order or peaceable re-entry.

Question 28

2.4 Forfeiture for non-payment of rent

Answer 28

The tenant may then apply for relief from forfeiture. This discretion to grant relief is an ancient equitable jurisdiction, but is now enshrined in various statutes.

Question 29

Relief

Answer 29

‘Relief’ means the court’s discretion to allow the lease to continue and thereby end the forfeiture process.

Question 30

2.4.1 Before the court order

Answer 30

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 31

2.4.2 At or after the court order

Answer 31

The court has a discretion to grant relief ie to allow the lease to continue on condition that the arrears are paid. When the landlord has re-entered under a court order, the application for relief must be made within six months of re-entry. Relief is usually given unless the circumstances are exceptional.

Question 32

Examples: Exceptional circumstances

Answer 32

• Where the property has already been lawfully let to a new tenant after the forfeiture (Stanhope v Haworth (1886) 3 TLR 34).
• Where the non-payment of rent is exceptionally bad. No relief was given in Public Trustee v
  Westbrook [1965] 1 WLR 1160 where no rent had been paid for 22 years, as the site was bombed out and everyone thought that the lease had ended.

Question 33

2.4.3 After peaceable re-entry

Answer 33

If the landlord forfeits a non-residential lease without a court order (or if less than six months’ rent
is in arrears), the court has an inherent equitable jurisdiction to grant relief if:
(a) The rent and landlord’s costs are paid; and
(b) It is just and equitable to grant relief

Question 34

Thatcher v Pearce [1968] 1 WLR 748

Answer 34

For example, in Thatcher v Pearce [1968] 1 WLR 748 a lease of a scrap yard was determined by peaceable re-entry by the landlord while the tenant was in prison. The tenant applied more than six months after forfeiture for relief and was successful. The court usually allows the lease to continue on the condition that the tenant pays off the
arrears.

Question 35

2.5 Forfeiture for breach of other covenants

Answer 35

In cases other than non-payment of rent, before the landlord can forfeit they must first serve
notice upon the tenant under LPA 1925, s 146.
There is no prescribed form of notice, but it must contain the following information:
* 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 36

2.5 Forfeiture for breach of other covenants

Answer 36

Note. The landlord does not have to request compensation if it does not want it (Rugby School
(Governors) v Tannahill [1935] 1 KB 87).
If capable of remedy and 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 (this is
compulsory in a residential case).

Question 37

What then is a reasonable time?

Answer 37

This depends upon the nature of the breach. Some textbooks
suggest three months as a rule of thumb. If the breach is not capable of remedy, the landlord must merely give the tenant enough time to consider its position, for example 14 days, before proceeding to forfeit (Scala House and District Property Co Ltd v Forbes).

Question 38

2.5.1 What breaches are capable of remedy?

Answer 38

Breaches which are capable of remedy include continuing breaches, for example failure to repair
or unauthorised use.

Question 39

Billson v Residential
Apartments Ltd [1992] AC 494

Answer 39

Unauthorised alterations may be capable of remedy.

Question 40

Scala House and District
Property Co Ltd v Forbes
[1974] QB 575

Answer 40

A breach of a covenant not to assign or sublet was held to be incapable of remedy.

Question 41

Rugby School (Governors) v
Tannahill [1935] 1 KB 87

Answer 41

Immoral use was held to be incapable of remedy because of the stigma attached to the premises

Question 42

London Scottish Properties v
Mehmet 1970 214 EG 837

Answer 42

The court construed a covenant against immoral use as
one prohibiting the kind of conduct that the great majority of people in this country would condemn as
being immoral.

Question 43

Hoffman v Fineberg [1949] 1
CH 245

Answer 43

Illegal use (unlawful gaming) was held to be incapable
of remedy.

Question 44

Van Haarlam v Kasner [1992]
64 P & CR 214

Answer 44

Illegal use (spying) was held to be incapable of remedy but in that case it was held that the landlord had actually waived the right to forfeit.

Question 45

2.5.2 Illegal/immoral use – is it capable of remedy?

Answer 45

Although in Rugby School (Governors) v Tannahill [1935] 1 KB 87 it was held that the breach of an
illegal or immoral use covenant was incapable of remedy in the 1930s, more recent case law has been more flexible in its approach, and it now seems that it depends on the facts of the case as to whether an illegal or immoral use covenant is capable of remedy, as per Harman J in Van
Haarlam v Kasner (1992) 64 P & CR 214. The judge also said, obiter, that he would have given relief from forfeiture if there had not been waiver, because forfeiture of the lease was out of proportion to the offence.

Question 46

Glass v Kencakes [1966] 1 QB 611

Answer 46

It was also held in Glass v Kencakes [1966] 1 QB 611 that such breaches are capable of remedy if the lessee did not know of the illegal or immoral use by a subtenant, as long as the lessee takes immediate steps to stop the use, including forfeiting the sublease within a reasonable time.

Question 47

Key case: Expert Clothing (Services and Sales) Ltd v Hillgate House Ltd [1986] Ch 340

Answer 47

Facts: The claimant’s solicitor served a s 146 notice on the defendant. The s 146 notice specified that the defendant was (amongst other breaches) in breach of the covenant to carry out the alterations by a necessary date and stated that the breach of the alterations covenant was incapable of remedy

Question 48

Key case: Expert Clothing (Services and Sales) Ltd v Hillgate House Ltd [1986] Ch 340

Answer 48

Facts: The judge at first instance held that the breach of the alterations covenant was incapable of remedy, and he granted an order for possession in favour of the claimant. The defendant appealed to the Court of Appeal, arguing that the breaches were capable of remedy and that the
s 146 notice was therefore invalid.

Question 49

Key case: Expert Clothing (Services and Sales) Ltd v Hillgate House Ltd [1986] Ch 340

Answer 49

Held: The breach was capable of remedy, the ultimate question being whether the harm suffered by the landlord could be effectively remedied by the tenant complying with a s 146 notice and making proper compensation.

Question 50

2.5.3 Conclusion: is a breach capable of remedy?

Answer 50

Following Expert Clothing, most breaches are now technically capable of remedy provided the mischief can be put right by making full recompense to the landlord, leaving the landlord with no lasting damage.

However, it is still probably the case that breach of a covenant against assignment or sub-letting, and possibly immoral or illegal use, is technically not capable of remedy. This was all confirmed in an obiter discussion by Neuberger LJ in Akici v LR Butlin [2006] 1 WLR 201.

Question 51

2.5.4 Relief

Answer 51

LPA 1925, s 146(2) provides that the tenant may in the landlord’s action, or in any action brought by itself, apply to the court for relief.
The court may grant or refuse relief as the court, having regard to all the circumstances, thinks fit. Therefore, in cases of breach of covenants other than rent, the tenant applies for relief under LPA 1925, s 146(2).

Question 52

2.5.4 Relief

Answer 52

It generally depends on how wilful and blatant the breach was, the gravity of the breach, the landlord’s motives for wanting forfeiture, the damage to the premises and whether the breach can be put right. Relief is usually given on condition that the breach is remedied and that the tenant undertakes not to breach the covenant again.

Question 53

2.5.5 Relief: if the landlord has exercised its right by applying for a court order

Answer 53

The tenant must apply for relief before the court order is made.
If (or once) the court makes an executed order for possession in favour of the landlord, no further
relief application is then available.

Question 54

2.5.6 Relief: if the landlord has exercised its right by peaceable re-entry

Answer 54

Where a landlord exercises its right to forfeit by peaceable re-entry, relief can still be given under s 146(2). This was confirmed by the House of Lords in Billson v Residential Apartments Ltd [1992] 2 AC 494 though, in the exercise of the court’s discretion, regard will be had to all the circumstances, including the speed with which the tenant applies for relief. The tenant must therefore apply for relief within a reasonable time after peaceable re-entry.

Question 55

Hyman v Rose [1912] AC 623

Answer 55

The House of Lords granted relief despite the tenant failing to comply with the repair and alterations
covenants, because the tenant gave a deposit of money to ensure the premises were restored to their original condition at the end of the lease.

Question 56

St Marylebone Property Co v
Tesco Stores Ltd [1988] 2 EGLR
40

Answer 56

The court refused to grant relief to a head-tenant or sub-tenant in the case of a blatant breach of the user
covenant by an unlawful sub-tenant

Question 57

Ropemaker Properties Ltd v
Noonhaven Ltd [1989] 2 EGLR
50

Answer 57

Relief was granted, despite the use of a nightclub for immoral purposes, because the immoral use had
ceased, there was no more stigma attaching to the premises, the tenant was excellent in all other respects,
the tenant had offered to sell the lease, and the managing director of the tenant was ill.

Question 58

2.6 Forfeiture for breach of repair covenants - additional protection for
tenants

2.6.1 Leasehold Property (Repairs) Act 1938

Answer 58

This Act applies to a covenant to repair in any lease (except an agricultural holding) when the
lease is granted for at least seven years and there are at least three years still to run. In addition to the usual requirements (ie the s 146 notice), the landlord must inform the tenant of its right under the 1938 Act to serve a counter notice within 28 days. If the tenant serves a
counter-notice, the landlord cannot proceed to claim forfeiture or damages without first
obtaining the leave of the court.

Question 59

2.6.1 Leasehold Property (Repairs) Act 1938

Answer 59

The effect of the Act is to limit severely the landlord’s ability to enforce a repairing obligation until
the last three years of the lease.
Further, where the landlord serves notice under LPA 1925, s 146 and the notice relates to internal decorative repairs, the tenant may apply to the court and be wholly or partially relieved of liability to the extent that the court thinks the notice unreasonable (LPA 1925, s 147).

Question 60

2.7 Sub-tenants

Answer 60

If a head-lease is forfeited, any sub-lease will also be destroyed.
A sub-tenant in the premises has the right to apply for relief from forfeiture. This is the case even
where the head-tenant cannot get relief itself. The court has the power to vest the head-lease in the sub-tenant on such terms as it sees fit,
including rent, but cannot grant the sub-tenant a lease for any longer than the term of the
original sub-lease.

Question 61

2.7.1 Sub-tenant’s right to relief for non-rent breaches

Answer 61

LPA 1925, s 146(4) allows a subtenant to apply to the court for relief against forfeiture for breach
of other covenants. It is a matter of discretion whether a subtenant will be granted relief. The House of Lords’ interpretation of s 146(2) in Billson must surely apply equally to s 146(4), so that a subtenant must apply for relief within a reasonable time after peaceable re-entry.

Question 62

2.8 Summary

Answer 62

• Forfeiture is a right for the landlord to terminate the lease prematurely for breach of covenant
  by the tenant.
• Legal leases must contain an express right to forfeit in the lease. This is also called a legal right
  of re-entry.
• A right to forfeit in the event of breach of a rent covenant is implied into an equitable lease.
• A right to forfeit can be waived if the landlord knows about the breach and then does some unequivocal act recognising the continued existence of the lease, such as demanding rent
  and/or accepting payment of rent

Question 63

2.8 Summary

Answer 63

• If the breach is continuing eg repair, the right to forfeit will arise again each day the breach
  continues.
• If the breach is non-continuing, such as sub-letting without consent, waiver is permanent.
• Forfeiture can be exercised by peaceable re-entry or court order. If the premises are residential or mixed residential and commercial, a court order must be obtained.

Question 64

Breach of rent covenant

Answer 64

• The landlord must have served a demand for payment, or the lease must waive this right (which is usua).
• The landlord can then forfeit the lease for the breach of covenant by peaceable re-entry or court order. However, if the tenancy is residential, the landlord must obtain a court order.
• The tenant, and any sub-tenant, can apply for relief from forfeiture. Relief is the court’s discretion to allow the lease to continue. Relief can be applied for regardless of whether the
  right has been exercised by court order or peaceable re-entry and will usually be granted if the tenant can pay off the arrears.

Question 65

Breach of a non-rent covenant:

Answer 65

The landlord must have served a LPA 1925, s 146 Notice.
* (Does the breach relate to a repair covenant? Consider does the additional protection under
LP(R)A 1938 or LPA 1925, s 147 apply?)
* The landlord can then forfeit the lease for the breach of covenant by peaceable re-entry or
court order. However, if the tenancy is residential, the landlord must obtain a court order.
* The tenant, and any sub-tenant, can apply for relief from forfeiture. Relief is the court’s discretion to allow the lease to continue. Relief can be applied for before (but not after) the
court order. In right has been exercised by court order or peaceable re-entry, relief must be
applied for within a reasonable time.

Question 66

3. Ending a lease

3.1 Effluxion of time

Answer 66

This is the usual common law way in which a lease for a fixed term comes to an end. No notice is needed to end a fixed term. The lease expires and the tenant has no right to remain in the premises after this point. Remember, however, that at the end of the lease the tenant may have security of tenure.

Question 67

3.1 Effluxion of time

Answer 67

Remember, security of tenure is the right for a tenant to remain in the premises at the end of the lease term and to request the grant of a new lease. Since the introduction of assured shorthold tenancies (ASTs) it is now very rare for a residential tenant to have security of tenure, but a commercial tenant may have security of tenure under the Landlord and Tenant Act 1954.

Question 68

3.2 Notice to quit

Answer 68

This is the method for determining a periodic tenancy. For a yearly tenancy, either side must give at least half a year’s notice to quit to determine the tenancy. Other periodic tenancies, for example quarterly, monthly or weekly, must be determined by a full period’s notice to expire at the end of a complete period

Question 69

3.3 Break clause

Answer 69

A lease for a fixed term may contain a provision allowing either (or just one) party to serve notice during its currency to bring it to a premature end.

Question 70

Example: Break clause

Answer 70

‘Either party may end this lease on the fifth anniversary of the term start date by serving 6 months written notice on the other […]’

Question 71

3.4 Surrender

Answer 71

A surrender is the handing back of the lease by the tenant to the landlord with the landlord’s
consent. This results in premature termination of the lease. A deed of surrender is often entered into in practice to document the agreement. Sometimes a surrender premium will be paid by the tenant to the landlord too

Question 72

3.5 Merger

Answer 72

This is 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 73

3.6 Summary

Answer 73

• A lease can come to an end for a number of reasons.
• The most common way is by effluxion of time; the lease term expires. Some tenants have
  security of tenure though.

Question 74

3.6 Summary

Answer 74

• Leases can also end by:
• Merger, if the tenant becomes the owner of the freehold reversion.
• Surrender, if the landlord and tenant agree to end the lease.
• A landlord exercising a right of forfeiture in the event of tenant breach.
• Either party exercising a break clause.
• Either party serving a notice to quit if the lease is a periodic tenancy.