A couple of quick notes on forfeiture of leases.

Cheerupmate2 Ltd v Calce (2017) UKUT 377 (TCC)

Forfeiture for ground rent arrears was not valid because:

a) The wrong notice under s.166 Commonhold and Leasehold Reform Act 2002 had been served. The notice was statutorily prescribed and the use of an older, pre-2011 version was not acceptable.

b) The landlord purported to forfeit on date after the deadline for payment given in the s.166 notice, asserting that some arrears of ground rent had been outstanding for more than three years. However, s.167(4) CLRA 2002 meant that the rent only became payable on the date specified in the s.166 notice, The lease prevented forfeiture before rent was unpaid for 2 years.

c) Section 167 of the CLRA required rent outstanding for 3 years before forfeiture, therefore 3 years from the date given in the s.166 notice.

Therefore the forfeiture was invalid and premature.

As the landlord was attempting to forfeit for £11 of unpaid ground rent (£2 pa), the lessee must have been happy with the result.

Toms v Ruberry (2017) EWHC 2970 (QB)

A pub lease, but the principle is generally relevant.

There was a dispute between the parties and the freeholder maintained that the lessee had not complied with various repair and decoration obligations under the lease.

In part, the lease provided

“if the tenant fails to maintain the standards as set forth in this agreement and manual …… then and in any such case it shall be lawful for the landlord, … to enter into or upon the premises … whereupon this agreement shall absolutely determine” (4.1.5)

and

“if the [tenant] commits any other breach of his obligations under this agreement and (where such breach is capable of remedy) the tenant fails to remedy any such breach within fourteen 14 days following the receipt of written notice from the landlord to remedy the same (`a default notice’) … then and in any such case it shall be lawful for the landlord … to enter into or upon the premises … whereupon this agreement shall absolutely determine” (4.1.7)

The landlord’s solicitors served a ‘default notice’  and at the same time served a section 146 notice, giving 7 weeks to remedy the breaches. After that time, the landlord held that not all the breaches had been remedied and brought a possession claim, based upon forfeiture under clause 4.1.7 (with no mention of clause 4.1.5)

The first instance and appeal courts both held that the section 146 notice could not be validly served before a right of re-entry had arisen. In this case, the right of re-entry under clause 4.1.7 only arose if the breach had not been remedied within 14 days of service of the ‘default notice’. The s.146 notice was served at the same time as the default notice and was therefore not valid. A later right of entry arising did not retrospectively enable the s.146 notice.

In my judgment the authorities establish that section 146 must be given a common sense interpretation, and that the purpose of the section is that the tenant should have full notice of what the tenant is required to do. However there is no authority to support the proposition that a section 146 notice may be served before the relevant right to re-entry has occurred. The wording of section 146(1) requires “a right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease”. The ordinary meaning of this provision suggests that the right of re-entry must exist because there is reference to “a right” not to “a future right”. This interpretation is supported by the requirement set out in section 146(1)(a) that the notice shall specify “the particular breach complained of”. This requires the “particular breach” to have occurred, because otherwise the service of the section 146 notice becomes a matter of guesswork about whether a particular breach will occur, and because it is not possible to specify a particular breach unless it has occurred. If the right of re-entry in this case arises because of a failure to take action within 14 days of the clause 4.1.7 notice, then the 14 days is required to elapse before the notice can be served because this is the particular breach relied on.