Not such a welcome relief!
This may well be the feeling of many commercial landlords when faced with an application for relief from forfeiture by their commercial tenant. Particularly since the landlord may have already failed to receive rent for several quarters or suffered several breaches of the lease.
As a brief reminder, the forfeiture of a commercial lease by a landlord for breach of any covenants in the lease effectively extinguishes the lease and with it the tenant’s right to remain in occupation to carry on its business. Landlords normally elect to forfeit the lease either by peaceably re-entering the premises let to the tenant or by issuing Court proceedings to obtain an order for possession by reason of forfeiture of the lease.
After obtaining possession of their premises the landlord could be forgiven for thinking that it is business as usual. However, the tenant then has the option of applying for relief from forfeiture to either the County Court or, in exceptional circumstances, the High Court. If the tenant is successful in its application the extinguished lease is effectively brought back to life and, as a result, the tenant is entitled to re-enter the premises sometimes several months after having left.
In cases of non-payment of rent where the landlord forfeits the lease by peaceable re-entry the tenant is able to apply for relief to the County Court within six months of the forfeiture. If the tenant applies to the High Court there is no time limit.
In cases where the landlord has forfeited the lease for non-payment of rent through Court proceedings the tenant again has six months to bring an application for relief in the County Court. If in the High Court, within six months if there are at least six months of arrears or, if less than six months arrears, at any time.
In the case of any other breaches of the lease, requiring the landlord to first serve a section 146 notice on the tenant giving them a reasonable period to remedy the breaches, the tenant can apply for relief at any time unless or until the landlord obtains a Court order for possession. Consequently, a landlord who forfeits the lease by peaceably re-entering the premises, for reasons unrelated to rent, leaves itself exposed to an application for relief from forfeiture.
For landlords the prospect of recovering premises promptly by peaceable re-entry is inviting and the general thinking is that unless the tenant makes an application within six months then it never will. However, the case of Pineport Limited v Grangeglen Limited in June 2016, which was decided in the High Court, has clearly demonstrated to landlords that relief can be granted fourteen months after forfeiture. This case involved the forfeiture of the lease by peaceable re-entry for non payment of rent.
Pineport serves as a sharp reminder to commercial landlords that if they wish to forfeit the lease and reduce the risk of the tenant making an application for relief, which may disrupt the landlord’s future plans for the premises, forfeiture by Court proceedings gives some degree of protection over peaceable re-entry.
If you have any queries concerning the matters raised please contact Harris Charalambous, Associate on 020 8567 3477 or e-mail firstname.lastname@example.org