This case deals with the lease of a public house. It has passed through a number of different landlords and tenants but the current landlord is Mr Toms and the tenant, Ms Ruberry.
The lease contains a range of provisions common to commercial leases, the most important here being those relating to repair and decoration. There is also a provision which states that if the tenant is in breach of these provisions the landlord can give a default notice and if that is not complied with after 14 days then the landlord can re-enter and the lease can be forfeited. There are a range of other provisions which allows for the right of re-entry to be utilised as well but this is the one that matters here. Naturally, the right of re-entry is restricted in the usual manner by s146, Law of Property Act 1925 and so a notice complying with that section must be served first.
In this case it was accepted that the tenant had not complied with the repairing and decoration provisions in full and the landlord duly obtained a surveyors report and served it along with a default notice. So far, so good. However, at the same time the landlord served a s146 notice as well.
The tenant accepted that the default notice was valid and at trial the Recorder found that the tenant was in breach of the relevant lease provisions. However, at trial and again on appeal the court found that “the landlord was not entitled to serve a section 146 notice until a default notice … had been given and the period of 14 days specified in that clause had passed without the breaches being remedied”.
On the first appeal HHJ Dingemans was clear that the service of an s146 must refer to an actual tigh to re-enter and not a putative future right. He said:
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 [sic] 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.
The Court of Appeal
Before the Court of Appeal it was argued that HHJ Dingemans was incorrect and that s146 only requires that the underlying breach which ultimately will give rise to a right to re-enter must have occurred and the right to re-enter need not have crystallised itself. Most of the remaining argument, while interesting, adds little to this essential proposition.
The Court of Appeal comprehensively rejected this line of argument. It, like HHJ Dingemans, put much emphasis on a common-sense interpretation to s146. It also pointed out that s146 is less directed towards underlying clauses of a lease which may have been breached and more to the specific provision in the lease which relates to re-entry or forfeiture. Further, and s146 notice is required to specify the breaches of the tenant complained of which give rise to the right to re-enter of forfeit. It cannot be the case that a breach could be adequately specified if it has yet to occur. In addition, in this case the s146 notice specified the breach as being one of failure to comply with the repair and decoration clauses whereas the correct breach to specify (as it is the one which gives rise to a right to re-enter) would have been a failure to comply with a default notice within 14 days, an event that had not of course happened when the s146 was served.
This is a fairly simple case really and is more one of clarifying a point that most people would probably have expected to be clear already. However, it has general application to s146 notices in residential leases as well as commercial ones.