Gaining insights on forfeiture - Estates Gazette Q&A

Emma Preece and Andy Creer answer a pair of questions on forfeiture.

Question

I am a tenant of a commercial premises in Reading, from which I run an independent coffee shop. My lease commenced on 1 October 2022 for a term of five years.

The lease provides that rent is to be paid quarterly on the usual quarter days. I always paid the rent on time until the business started to struggle 10 months ago.

This is due, in my view, to rising costs of living, and also because the area in which the building is located is subject to development works, which has reduced the footfall and impacted the ambience. I reached a payment plan with my landlord to cover the rent due on 29 September and 25 December 2023 (and I was able to adhere to this).

I am unable to pay the rent due on 25 March 2024 and, despite my suggestion to enter into a further payment plan (or even surrender my lease), my landlord hasn’t responded to my correspondence. In fact, I haven’t heard from my landlord since the December quarter at all.

When can the landlord regain possession of my property if I don’t pay?

Answer

If the lease provides a right of re-entry 21 days after the rent is unpaid, then the earliest date on which the landlord can regain possession is 16 April 2024.

Explanation

Modern leases provide that rent falls due whether it is formally demanded or not. But while your rent likely falls due on the morning of the date for payment, the rent is not unpaid until after midnight.

You would not be in arrears until 26 March: see Dibble v Bowater & Morgan (1853) 2 EL & BL 564.

 In calculating time, the general rule is where an instrument provides that a certain time must elapse, then this means clear days: see Zoan v Rouamba [2000] EWCA Civ 8 and Carapanayoti & Co Ltd v Comptoir Commercial Andre & Cie SA [1971] EWCA Civ 1203 (note that there are exceptions).

Here, the whole 21 days has to elapse before the right of re-entry is exercisable. 26 March is day one, 15 April is day 21 and the landlord can re-enter the next day.

This can be via peaceably re-entering the property (eg changing the locks), or by serving a claim for possession on you. The issuing of proceedings does not end the lease: Billson and others v Residential Apartments Ltd [1992] 1 AC 494; [1992] 1 EGLR 43.

The landlord would need to ensure it has not waived the right to forfeit the lease by acting in a manner that treats the lease as continuing once the right has arisen. This does not appear to have happened here, but if the landlord had waived the right to forfeit the lease but went on to change the locks, this is likely to amount to an unlawful forfeiture.

Question

In addition to the rent issue, the landlord is carrying out some works to the rear car park, which includes installing a new barrier entry system.

When I went in on Saturday morning, I couldn’t get into the car park to use my designated space. Some of the other tenants said they had been given entry codes by the landlord, but for some reason I hadn’t.

Is there any way I can rely on the landlord’s failure to do this as evidence that they have terminated my lease? I am concerned about my ongoing liabilities, particularly as the coffee shop is in my personal name.

Answer

No.

Explanation

From what you’ve said, no right of re-entry has arisen. You make no mention of any section 146 notice, which the landlord is obliged to serve in relation to breaches of the lease (other than non-payment of rent), prior to taking steps to forfeit it.

Had a right to re-enter arisen, then peaceable re-entry requires some form of actual physical act where the landlord intends it to be, and it amounts to, an “unequivocal retaking of possession of the premises”.

 It is questionable whether the failure to provide you with an entry code would amount to an unequivocal act, as it could be a simple oversight. We would need to know that any request for an entry code had been refused.

Re-entry on to part of the premises may constitute re-entry on to the whole, though this depends on the wording of the forfeiture clause in your lease. While all cases involving forfeiture are fact-specific, it is unlikely that excluding you from the car park alone would be sufficient if you were still able to gain entry to the coffee shop. The intention of the landlord would be material.

In the case of NPS (40GP) Ltd v Liberty Commodities Ltd [2023] EWHC 2137 (Ch); [2023] PLSCS 154, the landlord sought a declaration that the lease was continuing, where the tenant asserted that it had been forfeited by peaceable re-entry when the landlord upgraded a ground-floor entry barrier system and the tenant was not given new keycards.

The court held that deactivating the barrier system in the course of planned works did not forfeit the lease and there was no evidence that the tenant’s employees had been refused access, as none of them had requested new keycards (the demised premises were vacant at the time).

Emma Preece is a Senior Associate at Charles Russell Speechlys LLP and Andy Creer is a barrister at Landmark Chambers.

This article was first published in Estates Gazette on 12 March 2024.