Forfeiture is, for the most part, beloved by landlords and hated/feared by tenants. For what might be relatively minor breaches of covenant, you can lose your lease and the landlord make an enormous windfall. The legislative trend is (slowly) in favour of restricting (and possibly even abolishing) forfeiture as demonstrated by s.168, Commonhold and Leasehold Reform Act 2002. By s.168, Commonhold and Leasehold Reform Act 2002, a landlord may not serve a notice under s.146, Law of Property Act 1925, or otherwise exercise a right of re-entry (i.e. forfeiture) in respect of a breach of a covenant (other than one to pay rent – which is unaffected by s.146, see s.146(11); or service/administration charges, which are dealt with under s.81, Housing Act 1996), unless the breach has been admitted by the tenant or determined by a court, LVT or arbitral tribunal.
In Cussens v Realread Ltd [2013] EWHC 1229 (QB), Ms Cussens was the leaseholder of two flats in a block owned by Realread. It was alleged that the flats were used for “unlawful and immoral” purposes, (namely prostitution and that this was a nuisance*; this behaviour was said to be a breach of covenant. Realread wanted to forfeit the lease and, so, in an effort to comply with s.168, 2002 Act, issued proceedings in the county court seeking a declaration that there had been a breach of covenant. Given the unchallenged evidence from two police officers and another leaseholder, the factual basis of the claim was made out and the CJ granted a declaration as sought and made an order for costs. There is no suggestion in the judgment that Ms Cussens was in any way personally responsible for any of this
Ms Cussens appealed to the High Court arguing that there was no jurisdiction to enable the county court to make a declaration of this nature. The appeal was dismissed. There was nothing in s.168, 2002 Act which dealt with whether a county court could make a declaration of this sort, but that was besides the point. The court court had jurisdiction under s.15, County Courts Act 1984 to deal with cases about contracts. The lease was a contract and so the county court had jurisdiction. However, (a) the county court could always transfer the case to the LVT for determination; and, (b) there was a potential argument (for another day) as to whether the county court, if it were to deal with such a case, should apply a limited costs power, akin to the restrictive powers of the LVT.
* probably only to other residents although this isn’t made clear
But the flatowner had the opportunity to join with the landlrod and take action to terminate the tenancy for what is likely a breach of the tenancy. Any Court, whether they or the FTT determine if there is breach of the lease, would grant relief or suspension to allow that to occur. A Court can also take into consideration the LL’s failure to resolve this by other means rather than opting for forfeiture While its topical to bash forfeiture, leases commonly only provide for this method and recovery of costs. While a commercial company with a broad base might bear the costs, what if the LL was a residents group facing considerable costs for the alternatives with no prospect of recovery of the costs.
There are rights to protect leaseholders and they should like any owner of any item, especially if you are in effect a business letting out a flat, learn and use those rights, especially in the context of meeting their broader obligation to the residents of the building. Presumably the owner felt that they had no obligation to address the use of their flat as a knocking shop !
I agree that it is common to bash forfeiture these days, but that is because – as a remedy – it deserves bashing! It has potential to be such an unfair and disproportionate remedy for a landlord and, frankly, given how relatively rare an executed possession order is, there is ample scope for reform by abolishing the remedy. I’m not even sure you’d need to create a new remedy to replace it. Injunctions and money judgments (ultimately leading to bankruptcy if not paid) should be more than adequate.
As to lessee-owned/controlled freeholders (or RTM companies) – I’m reluctant to create special remedies or indulgences for classes of landlord. Surely better for the freehold company / RTM company to establish a “rainy day” fund.