Cheerupmate2 Ltd v Franco De Luca Calce [2017] UKUT 377 (TCC)

The Upper Tribunal (Lands Chamber) has held that a landlord’s attempt to forfeit a long residential lease for non-payment of rent was ineffective owing to various technical defects in the landlord’s rushed approach. The landlord had failed to demand the rent using the prescribed form of rent demand and had denied the tenant the benefit of a two year grace period provided for in the lease. This period would run from the due date in a valid rent demand, not the due date in the lease. Furthermore, even if a valid demand had been sent, the arrears only totalled £11, so a three year restriction on the right to forfeit would apply. The case is a useful reminder of the regulations landlords of long residential leases must abide by, and a cautionary tale for landlords seeking a quick windfall through forfeiture action.

The facts

Cheerupmate2 Ltd, perhaps appropriately named, was the landlord of property let to Mr Calce pursuant to a 900 year lease granted in 1997. The lease reserved an annual ground rent of £2, payable half yearly. Although no dwelling had been constructed on the land, the lease described the property as a “dwellinghouse” and it was accepted by both parties that the statutory regimes for residential property would apply.

On 12 March 2015, the landlord sent the tenant a letter to inform him that it was the new landlord. The letter also demanded payment of arrears of ground rent in the sum of £11, to be paid on 20 April 2015. The lease stated that the landlord would have the right to forfeit if the rent was unpaid for a period of two years after falling due and it was clear that over five years’ ground rent had not been paid.

The tenant did not make the required payment and on 21 April 2015 the landlord re-entered the land and purported to forfeit the lease. On the same day, it also applied to the Land Registry to close the tenant’s title, but the tenant objected and the matter was referred to the First Tier Property Tribunal. Although the tenant successfully argued that there had been no effective forfeiture at the First Tier Tribunal, the landlord was granted leave to appeal to the Upper Tribunal.

The applicable law

Landlords that successfully forfeit long leases at nominal rents usually stand to benefit from a considerable windfall, as the property may be leased again for a premium. Such action will no doubt be highly prejudicial to a tenant, so statute has intervened to restrict landlords’ enforcement rights and regulate their management duties. In this case, the following provisions were relevant:

  • A landlord must inform its tenant of its address for service in England and Wales, failing which any demand for rent or service charge shall be ineffective (see section 48 of the Landlord and Tenant Act 1987).
  • A landlord of a long lease must give notice to its tenant to require payment of rent, in a prescribed form, failing which the tenant will not be liable (see section 166 of the Commonhold and Leasehold Reform Act 2002). In summary, the notice must specify the amount payable and the date the tenant is liable to pay it. This date must not be less than 30 days or more than 60 days after the notice is served, and the date must not be before the tenant falls liable to pay the sum under the lease.
  • A landlord of a long lease cannot forfeit for arrears of rent unless these arrears exceed £350, or the rent has been in arrears for over three years (see section 167 of the Commonhold and Leasehold Reform Act 2002).

Proceedings before the Upper Tribunal

The Tribunal upheld the initial decision and found against the landlord. Three arguments had been raised by the tenant, each of which alone was sufficient to prove that the lease was continuing. These were as follows:

  • The rent demand did not contain the correct prescribed wording.The landlord’s rent demand was found to contain historic prescribed wording, which had been in use prior to a statutory amendment in 2011. This amendment was intended to make the language clearer, as the original wording contained an unhelpful double negative, but the meaning remained identical. Even so, the Tribunal held that this was not merely a technical error, as parliament had deliberately enacted legislation to make this change.
  • The landlord was not entitled to forfeit the lease unless the rent was unpaid for over two years.In this case, the landlord purported to serve its rent demand on 12 March 2015. Even if that notice had been valid, the due date was fixed on 20 April 2015. The lease contained a provision to ensure that the remedy of forfeiture could not be exercised for at least two years after the “due date”, which would be the date stated in the notice.
  • The rent arrears were below £350, so forfeiture would have been unavailable for three years pursuant to statute.The arrears totalled £11, so statute imposed a further restriction on the landlord’s right to forfeit, preventing forfeiture for at least three years after the due date in a valid rent demand. Accordingly, had the landlord’s rent demand been validly served to require payment on 20 April 2015, the landlord would have been unable to forfeit the lease for non-payment until 21 April 2018.

Our comment

This case serves to highlight the difficulties that arise when attempting to forfeit a long residential lease. While the landlord could have found itself in a stronger position by serving a valid rent demand for the arrears, it would never have been in a position to take immediate action to forfeit the lease. Given that the arrears were so low, it is hard to argue that the outcome was unfair. However, the strict nature of the Tribunal’s approach to the prescribed wording for the rent demand may worry landlords who are simply trying to keep up with legal changes. Even if the landlord had acted properly, it is likely that the tenant would have obtained relief from forfeiture if it paid the arrears. Had the breach of lease not involved unpaid rent, yet further tenant protections would have applied!