In the recent case of Pineport Limited v Grangeglen Limited the High Court was asked to consider whether a commercial tenant whose lease had been forfeited (i.e. brought to an end) by peaceful re-entry by its landlord on the grounds of non-payment of rent was entitled to relief from forfeiture despite applying for it some 14 months later.
In commercial leases, there is usually a provision which allows the landlord to forfeit it and regain possession if there are any arrears. Where a lease has been forfeited like this, a tenant can apply for relief. If the application is successful the tenant will be placed back into the property and the lease will be reinstated as if the forfeiture had never occurred. However, a tenant who seeks relief must do so with “reasonable promptitude”. The general rule is applications must be made within six months. However, this is not a strict time limit but simply a guide which is followed by the courts.
In this case the tenant had a 125 year lease. It had paid a £90,000 initial premium and had covenanted to pay the ground rent of £100 per annum, the service charge and the cost of insuring the premises.
The landlord forfeited the lease by peaceable re-entry for non-payment of the service charge totalling £2,155. The tenant applied for relief.
Although there had been a significant delay by the tenant in applying, the court decided to grant relief for the following reasons:
- The tenant had paid a large premium and the ground rent was only £100 per year – the landlord would have received a substantial windfall if relief was not granted as the property was valued between £275,000 to £300,000.
- As the landlord had not taken any steps to re-let the property after the forfeiture, there was no prejudice to the landlord or to any third parties.
- The tenant was able to pay the arrears, interest and costs in full.
- There was a reasonable explanation by the tenant for the delay – the director of the tenant company had been serving a prison sentence and he was also suffering from depression.
Whilst this case was decided on its own facts, it does highlight the wide discretion which the court has when considering applications for relief from forfeiture. Although it is usually the case that such an application will fail if the tenant has not made it within six months, this case illustrates that the court will take into account all circumstances when exercising its discretion and that a long delay in applying may not necessarily mean failure. Having said that, tenants who are seeking relief would be wise to apply without delay and, if at all possible, within six months from when the lease was forfeited.
If you have any issues relating to leases then the Property Litigation Team at Blacks Solicitors are happy to help. Please contact Luke Patel on 0113 227 9316 or email him at LPatel@LawBlacks.com.