The Court of Appeal has considered the correct approach to granting relief from forfeiture where the landlord stands to gain a substantial windfall. The case provides a useful clarification of the Court’s approach to granting or withholding relief from forfeiture.

In the case of Freifeld and another v West Kensington Court Ltd [2015] EWCA Civ 806, the tenant had underlet one of its seven commercial units, without consent of the landlord, to a Chinese restaurant which had caused several issues for the residential occupiers above, deliberately breaching its covenants. The landlord forfeited the lease and the tenant’s application for relief from forfeiture was refused by the County Court. As the lease was of high value and had a considerable period left to run, the landlord stood to fain a windfall of between £1-2 million. 

However, when the tenant appealed, the Court of Appeal granted the relief from forfeiture, on the condition that the tenant assigns the lease within six months. The Court held that relief could still be granted even if the tenant’s breach was deliberate. It said the County Court was wrong not to consider the windfall that the landlord would gain from forfeiture of the lease. It should have weighed this fact against all of the circumstances and considered whether forfeiture was a proportionate remedy. Imposing the condition of assigning the lease struck the balance between the interests of both parties.

This case highlights the balancing act the Court must make in considering whether to grant relief from forfeiture. Even where a tenant has made a deliberate breach, relief may be granted if forfeiture is considered too severe or the benefit to the landlord is disproportionate.

Both landlords and tenants should seek early legal advice where there is any indication of a breach of covenant, as forfeiture remains a complex issue with significant implications for both parties.