The High Court has provided a surprising decision as to the circumstances in which it may exercise its discretion to grant relief from forfeiture. The tenant applied for relief from forfeiture 14 months after the date the lease was forfeited by peaceable re-entry (changing the locks).
The Court granted relief from forfeiture (which had arisen for non-payment of rent).
The judgment gives interesting guidance on how the Courts should approach applications for relief. The 14 month time period for the ultimately successful application for relief will leap off the page to most property professionals.
The background to the case is that on 24 April 2014 the landlord forfeited the lease due to unpaid rent amounting to £2,155. A claim for relief from forfeiture was issued on 23 June 2015. One of the reasons for the delay was because one of the Directors of the Tenant was serving a prison sentence for MOT fraud carried out at the premises. He was also unfortunately suffering from depression and the Court found he did not understand the risk of allowing an asset with a value of £275,000 to be forfeited for a sum amounting to less than 1% of its value.
The Court heard evidence from his brother and was satisfied there was a reasonable prospect the original and subsequent arrears together with additional amounts (such as business rates) totalling £23,000 could be paid to the Landlord within 12 weeks of the hearing – the payment being a condition of the Tenant obtaining relief.
The Court decided that “reasonable promptitude” was an elastic concept for any application for relief from forfeiture and 14 months was near to the breaking point for the concept’s elasticity. However, on balance, the Court was influenced by the fact the Tenant had paid a substantial premium for the long lease and the human factors affecting the Tenant’s delayed application. Further, the Landlord had actually done nothing to market the unit after the forfeiture.
- where a lease is forfeit by peaceable re-entry a 6 month period for applying for relief is merely a guide, an “elastic concept”
- special factors can determine the period for relief is much longer
- landlords ought to be active when faced with the uncertainty of whether a tenant intends to make an application for relief
- a well advised landlord looking to resist relief (or promptly establish whether relief will be sought) will build evidence of prejudice so the court’s exercise of its inherent jurisdiction will fall in the landlord’s favour.