The recent High Court ruling in Pineport v Grangeglen  EWHC 1318 (Ch) provides helpful clarification on the elasticity of the Court’s equitable jurisdiction to grant a tenant relief from forfeiture where the landlord has peaceably re-entered for non-payment of rent.
Whilst highly fact specific the decision in Pineport creates some uncertainty around forfeiting by peaceable re-entry as opposed to court proceedings.
Despite taking some 14 months to make its application the tenant was not precluded from obtaining relief as a result of the delay. Whilst relief was granted due to the tenant’s circumstances the ability to grant such relief was available because the statutory provisions fixing a six month time limit for applications for relief only apply to forfeiture arising from proceedings and do not apply to the Court’s equitable jurisdiction to grant relief where the forfeiture has arisen from peaceable re-entry.
In coming to its decision the Court had to consider whether or not the tenant’s application had been made with “reasonable promptitude” and used the statutory six month time limit as a guide.
The Court also considered a number of factors including the prejudice suffered by the landlord, the value of the lease, the tenant’s ability to repay the arrears and other breaches of the lease.
Taking each in turn the Court considered:
- that on the facts the landlord was unable to prove that it had suffered any prejudice as it had taken no steps to re-market the premises or obtain any premium for a long leasehold interest in the premises.
- the level of arrears also represented less than 1% of the value of the lease and as such there would be a severe disproportion between the value obtained by the landlord as a “windfall” in recovery of the premises and the sum actually due to the landlord.
- the tenant’s circumstances (one of the tenant company’s directors was in prison for MOT fraud and had been suffering from depression at the time that the lease was forfeited) were such that the tenant director was not in a position to fully appreciate the risk of allowing the lease to be forfeited for such a small amount of arrears.
- the tenant was also able to demonstrate that the arrears would be paid off within a reasonable period of time (i.e. within 12 weeks of the hearing) and that there was no risk that any illegal activity would continue from the premises as the tenant had lost its licence to issue MOT certificates.
The implications of the decision in Pineport are that the Courts appear prepared to take a broad range of factors into account when deciding whether or not to grant a tenant relief and whilst a delay in excess of six months will prove a difficult hurdle for most tenants to overcome it will not in itself present a bar to an application for relief where the forfeiture has occurred by peaceable re-entry.
Landlords need to balance the risk of taking steps too soon after forfeiture against being pro-active once forfeiture has been effected so they are able to provide evidence of prejudice suffered should that be necessary. They should also consider whether there are any special factors that may be taken into account by the Court when assessing the tenant’s chances of successfully obtaining relief in advance of peaceably re-entering or take the more costly, but also more certain, route of issuing proceedings.