Nuts and Bolts II Possession actions against commercial ... · Nuts and Bolts II Possession actions...

© Louisa Nye, September 2011

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Nuts and Bolts II

Possession actions against commercial tenants

Overview

This paper is designed to set out the key points that should be borne in mind when bringing a

possession action against a commercial tenant either by section 25 notice under the Landlord and

Tenant Act 1954 (“the LTA”) or by forfeiture.

In individual cases complex issues may arise in relation to any stage of the procedure. It is not my

intention to deal with all the possible pitfalls or issues that may arise but simply to indicate some of

the common problems that occur.

(I) Landlord and Tenant Act 1954

(a) Who is a ‘commercial’ tenant?

Part II of the LTA 1954 applies to:

any tenancy where the property comprised in the tenancy is or includes premises which are

occupied by the tenant and are so occupied for the purposes of a business carried on by

him or for those and other purposes.1

“Business” includes any trade, profession or employment, and includes any activity carried on by a

body of persons, whether corporate or unincorporated.2

The wide definition of business means that a variety of tenants who might not be referred to

colloquially as ‘commercial’ will fall within Part II of the LTA 1954. This includes, for example, clubs3,

hospitals4, schools and government offices5.

The LTA does not apply when any business use is in breach of prohibition in the terms of the

tenancy.

(b) What tenancies are included?

Section 69(1) provides:

―tenancy‖ means a tenancy created either immediately or derivatively out of the freehold,

whether by a lease or underlease, by an agreement for a lease or underlease or by a tenancy

1 Section 23(1) LTA

2 Section 23(2) LTA

3 Addiscombe Garden Estates Ltd v Crabbe [1958] 1 QB 513

4 Hills (Patents) Ltd v University College Hospital Board of Governors [1956] 1 QB 90

5 Town Investments Ltd v Department of the Environment [1978] AC 359


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agreement or in pursuant of any enactment (including this Act), but does not include a

mortgage term or any interest arising in favour of a mortgagor by his attorning tenant to his

mortgagee, and references to the granting of a tenancy and to demised property shall be

construed accordingly

This therefore includes tenancies created by tenancy agreements and tenancies by estoppel6.

It should be noted, however, that it is widely accepted that Part II of the LTA does not apply to

tenancies at will7. Nor are licences included.

Further certain tenancies are expressly excluded from Part II of the LTA. These are set out in section

43 and include:

a tenancy of an agricultural holding or a farm business tenancy

mining leases

a service tenancy (i.e. a tenancy granted by reason of the tenant holding an office,

appointment or employment, and ending or terminable with it)8

a short tenancy (i.e. a tenancy granted for a term certain not exceeding six months, unless

the tenancy contains provision for renewing the term or extending it beyond six months

from its beginning, or the tenant has been in occupation for a period which, together with

any period during which any predecessor in the carrying on of the business carried on by the

tenant was in occupation, exceeds twelve months9)

Although short tenancies (as defined) are excluded the LTA does apply to all periodic tenancies,

including weekly periodic tenancies.

(c) How does the LTA affect obtaining possession?

The key provision which affects obtaining possession is section 24 which provides as follows:

(1) A tenancy to which this Part of this Act applies shall not come to an end unless terminated

in accordance with the provisions of this Part of this Act; and, subject to the following provisions

of this Act either the tenant or the landlord under such a tenancy may apply to the court for an

order for the grant of a new tenancy—

(a) if the landlord has given notice under section 25 of this Act to terminate the tenancy, or

(b) if the tenant has made a request for a new tenancy in accordance with section 26 of this

Act.

6 Bell v General Accident Fire & Life Assurance Corporation Ltd [1998] 1 EGLR 69

7 Wheeler v Mercer [1957] AC 416; Hagee (London) Ltd v A.B. Erikson and Larsen [1976] QB 290; Javad v Aqil

[1991] 1 WLR 1007 8 Any service tenancy granted after the commencement of the LTA will not be a service tenancy unless the

tenancy was granted by an instrument in writing which expressed the purpose for which the tenancy was granted: sub-section 46(2) LTA 9 Sub-section 46(3) LTA


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(2) The last foregoing subsection shall not prevent the coming to an end of a tenancy by notice

to quit given by the tenant, by surrender or forfeiture, or by the forfeiture of a superior tenancy,

unless—

(a) in the case of a notice to quit, the notice was given before the tenant had been in

occupation in right of the tenancy for one month

The result of section 24 is that a business tenancy for a fixed term will not determine by effluxion of

time but will continue indefinitely provided the tenant remains in occupation until terminated by

any of the methods set out in section 24. The continuation of the tenancy is subject to the same

rents, terms, conditions and incidents as before.

The consequence of Part II of the LTA is that a business tenancy can only be determined in one of

the following ways:

by the landlord giving a notice under section 25 which is not opposed by the tenant, or, if

opposed, is followed by an application for termination under section 29(2);

by the tenant making a request for a new tenancy under section 26 which is refused and the

court does not make an order for a new tenancy;

by the tenant serving a notice under section 27 renouncing the protection of the LTA;

by the tenant giving notice to quit;

by surrender (although bear in mind sections 38, 38A(2) and 38A(4));

by forfeiture

The main methods by which landlords will seek to recover possession of commercial premises will

therefore be (i) by notice under section 25 or (ii) by forfeiture.

(d) “Occupation by the tenant”

For section 24 to operate the tenant must be in occupation on the contractual termination date.10

Where there is a chain of tenancies it is likely to be the person with the lowest interest in the chain

who will be in actual occupation of the premises and thus entitled to the protection of the LTA.

There are two situations which should be noted:

Occupation by a company which the tenant controls will also suffice for the purposes of the

LTA, as will occupation by an individual who controls the company: section 23(1A).

A tenant who sub-lets the property may still be considered to “occupy” the premises,

provided he still has a degree of control over the premises: Bagettes Ltd v G.P. Estates Ltd

[1956] Ch 290; Graysim Holdings Ltd v P&O Property Holdings Ltd [1996] AC 329.

Note also that there are special rules dealing with situations where the occupying business is not

carried on by the tenant. These are set out in the following sections of the LTA:

Section 41A – a partnership of which the tenant is a member;

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Section 27(1A) LTA


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Section 23 and 46 – a limited company where the tenant has a controlling interest in the

company carrying on a business from the premises

Section 42 – a member of a group of companies

Section 41 – a trust relationship exists between the persons carrying on the business and

the tenant

Section 56 – government departments

(e) Competent landlord

As the LTA operates to give protection to the ‘lowest’ subtenant in a chain of tenancies it is also

important to check that your client is the ‘competent landlord’. The rules for determining this are in

section 44 and the Sixth Schedule of the LTA.

The ‘competent landlord’ will be the person who is an owner of an interest ‘nearest’ to the relevant

tenancy which is:

An interest in reversion expectant (whether immediately or not) on the termination of the

relevant tenancy, and

Either it is the fee simple, or

It is a tenancy which will not come to an end within 14 months by effluxion of time and

If it is such a tenancy, no notice has been given by virtue of which it will come to an end

within 14 months (or any further time by which it may be continued under the interim

continuation provisions in the Act)

(f) Contracting out

The fundamental rule set out in section 38 of the LTA is that any agreement is void in so far as it

purports to preclude the tenant from applying to the court for or making a request for a new

tenancy, or provides for the termination or surrender of his tenancy, or for the imposition on him of

any penalty if he makes such a request.

However, this is subject to a significant exception. Post 1 June 2004 the parties are able to agree to

contract out of the security of tenure provisions in sections 24-28 of the LTA provided they comply

with the relevant procedural requirements. (Prior to 2004 such agreements had to be sanctioned by

the Court before they were entered into.)

Section 38A(1) permits contracting out provided (i) the tenancy is for a term of years certain and (ii)

the exclusion agreement is made between the persons who will be the landlord and tenant in

relation to such a tenancy.

Section 38A(3) provides that an agreement under section 38A(1) will be void unless the appropriate

notices are served. The forms of the notices and relevant requirements are set out in Schedules 1

and 2 of the Regulatory Reform (Business Tenancies)(England and Wales) Order 2003.


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If the tenancy falls outside Part II as a consequence of such an agreement the common law rules in

relation to termination of a tenancy will apply. This should therefore be checked before possession

proceedings are issued.

(II) Section 25 notices

Section 25 provides as follows:

(1) The landlord may terminate a tenancy to which this Part of this Act applies by a notice

given to the tenant in the prescribed form specifying the date at which the tenancy is to

come to an end (hereinafter referred to as ―the date of termination‖):

Provided that this subsection has effect subject to the provisions of section 29B(4) of this Act

and the provisions of Part IV of this Act as to the interim continuation of tenancies pending the

disposal of applications to the court.

(2) Subject to the provisions of the next following subsection, a notice under this section

shall not have effect unless it is given not more than twelve nor less than six months

before the date of termination specified therein.

(3) In the case of a tenancy which apart from this Act could have been brought to an end

by notice to quit given by the landlord—

(a) the date of termination specified in a notice under this section shall not be earlier than

the earliest date on which apart from this Part of this Act the tenancy could have been

brought to an end by notice to quit given by the landlord on the date of the giving of the

notice under this section; and

(b) where apart from this Part of this Act more than six months' notice to quit would have

been required to bring the tenancy to an end, the last foregoing subsection shall have

effect with the substitution for twelve months of a period six months longer than the

length of notice to quit which would have been required as aforesaid.

(4) In the case of any other tenancy, a notice under this section shall not specify a date of

termination earlier than the date on which apart from this Part of this Act the tenancy would

have come to an end by effluxion of time.

(6) A notice under this section shall not have effect unless it states whether the landlord is

opposed to the grant of a new tenancy to the tenant.

(7) A notice under this section which states that the landlord is opposed to the grant of a

new tenancy to the tenant shall not have effect unless it also specifies one or more of the

grounds specified in section 30(1) of this Act as the ground or grounds for his opposition.

(8) A notice under this section which states that the landlord is not opposed to the grant of

a new tenancy to the tenant shall not have effect unless it sets out the landlord's

proposals as to–

(a) the property to be comprised in the new tenancy (being either the whole or part of the

property comprised in the current tenancy);

(b) the rent to be payable under the new tenancy; and


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(c) the other terms of the new tenancy.

(Emphasis added)

There are three points to note in relation to a section 25 notice (i) the form of the notice (ii) the

timing of the notice (iii) the landlord’s position in relation to a new tenancy.

Once a landlord has served a valid notice under section 25 he is not entitled to withdraw it and serve

a fresh notice.

(a) The form of the section 25 notice

The prescribed form for a section 25 notice is set out in the Landlord and Tenant Act 1954, Part 2

(Notices) Regulations.11 Schedule 1 of the Regulations sets out that Form 1 is to be used in

circumstances where the landlord is not opposed to the grant of a new tenancy and Form 2 is to be

used where the landlord is opposed to the grant of a new tenancy. (Copies of the notices are

annexed to this paper.)

(b) Timing

The section 25 notice must specify a date of termination. In all cases the notice must be given to the

tenant not more than twelve nor less than six months before that date.

In relation to a fixed term tenancy the notice under section 25 should not specify a date sooner than

the date that the tenancy would have ended by effluxion of time. It should be noted that this does

not prevent the landlord from specifying a later date if there are practical or other reasons for

wishing to do so.

In relation to a periodic tenancy or a tenancy terminable by notice to quit the termination date must

fall after the date on which the tenancy could have been brought to end by a notice to quit by the

landlord. (Note that section 25(3)(b) provides for an extension of the time limits by six months

where under the tenancy more than six months’ notice to quit is required.)

Unlike with comparative notices in the case of residential tenancies there is no requirement that a

notice under section 25 state a termination date which coincides with what would have been the

last day of the tenancy under common law. The notice must simply state a termination date which is

not earlier than the date that the tenancy would have come to an end save for the effect of Part II of

the LTA.

(c) Landlord’s position in relation to a new tenancy

In order for the section 25 notice to be valid it must state the landlord’s position in relation to a new

tenancy. This requires the landlord to set out the grounds under section 30 on which he would

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SI 2004/1005


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intend to rely if there was an application to the court (see below), or to set out the terms of any new

tenancy.

If the landlord intends to oppose the grant of a new tenancy it is important that proper

consideration is given to the grounds on which he intends to rely. At court the landlord may only rely

on such grounds as are stated in a notice to determine the tenancy. The grounds under section 30

are considered in greater detail below.

(d) Interrelation with a tenant’s request under section 26

If a landlord has decided that he wishes to obtain possession of premises demised to a commercial

tenant then he will often take the first step to initiate those proceedings (either by service of a

section 25 notice or by seeking to forfeit the lease as set out below). A further potential scenario

that can arise is where the tenant takes the initiative and seeks to obtain a new tenancy under

section 26 of the LTA.

A section 26 notice cannot be served if the landlord has served a section 25 notice, or if the tenant

has already given notice to quit or notice to terminate a fixed term tenancy pursuant to section 27.

The relevant prescribed form for such a notice is Form 3 in Schedule 1 of the Landlord and Tenant

Act 1954, Part 2 (Notices) Regulations. (A copy of the notice is annexed to this paper.)

A tenant holding under an ordinary periodic tenancy cannot make a request for a new tenancy.

Section 26 only applies to tenants who hold for a term certain that exceeds a year, or who hold

under a tenancy for a term certain and thereafter from year to year. However, note that an ordinary

periodic tenant can claim a new tenancy if the landlord initiates the process by serving a section 25

notice.

A section 26 notice must specify a date for the commencement of the new tenancy not more than

twelve and not less than sixth months after the date the request for a new tenancy is made. The

date must also not be earlier that the date that the current tenancy would have come to an end by

effluxion of time (but for the Act) or could be brought to an end by a tenant’s notice to quit.

If the landlord opposes the new tenancy he may serve a notice on the tenant under section 26(6)

stating that he will oppose an application to the Court for a grant of a new tenancy. Such a notice

should state the grounds under section 30 on which such an application will be opposed. The giving

of such a notice under section 26(6) is a prerequisite to a landlord seeking an order for the

termination of the tenancy under section 29(2)(b) (see below) and therefore should be served within

two months of the tenant’s request under section 26. The landlord will only be able to rely at court

on the grounds of opposition set out in his notice. There is no prescribed form for a notice under this

sub-section.


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(e) Applications to Court

The procedures to be used in relation to applications to Court under the LTA are set out CPR Part 56.

Once court proceedings have been commenced the continuation tenancy continues until those

proceedings have been ‘disposed of’.12

All claims under Part 56 must be started in the County Court for the district in which the land is

situated. Unless an enactment provides otherwise a claim may only be started in the High Court if: (i)

there are complex disputes of fact or (ii) there are points of law of general importance.13

If the claimant starts the claim in the High Court and the court decides that it should have been

started in the County Court, the court will either strike out the claim or transfer it to the County

Court on its own initiative. The court will normally disallow the costs of starting the claim in the High

Court and the costs of transfer.14

In all cases the claim form must contain details of15:

the property to which the claim relates

the particulars of the current tenancy (including date, parties and duration), the current rent

(if not the original rent) and the date and method of termination

every notice or request given or made under sections 25 or 26

the expiry date of (a) the statutory period under section 29A(2) or (b) any agreed extended

period made under section 29B(1) or s29B(2)

Time limits

Applications to court are governed by a strict timetable. The court has no jurisdiction to extend time,

although the parties may waive time limits either expressly or by implication.

Where the current tenancy has been terminated by a landlord’s section 25 notice the application

must be commenced not later than the date specified in the notice.16 Where a tenant has made a

request under section 26 the application must be made at any time immediately before the date

specified in the request, but also not earlier than two months after the request was made, save

where the landlord has given notice under section 26(6).17

The time limits under section 29A can be extended by an agreement pursuant to section 29B.

However, such an agreement must be entered into either before the date specified in a section 25

notice or the day before the date specified in a section 26 request.

12

Section 64 LTA 13

Civil Procedure Rules r 56.2 and PD 56 para 2.4 14

CPR PR 56 para 2.3 15

CPR PD 55 para 2.4 16

Section 29A(2)(a) LTA 17

Sub-sections 29A(3)(b) and (3) LTA


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Landlord’s application

After serving a section 25 notice (stating that he is opposed to the grant of a new tenancy) a landlord

may apply for an order terminating the tenancy under section 29(2).

Similarly where a tenant serves a section 26 notice the landlord may give notice to the tenant within

two months of the section 26 notice that the landlord will oppose an application to the court for the

grant of a new tenancy (section 26(6)), and may then proceed to make an application under section

29(2).

All claims for termination under section 29(2) are treated as opposed claims18 and therefore the

landlord must use the Part 7 procedure.19

Where the landlord is making a claim for the termination of a tenancy under section 29(2) the claim

form must contain (in addition to the particulars already mentioned)20:

the claimant landlord’s grounds of opposition

full details of those grounds of opposition; and

the terms of a new tenancy that the claimant proposes in the event that his claim fails

The defendant tenant’s acknowledgement of service should be in form N9.21 In the defence the

defendant must state with particulars22:

whether the defendant relies on section 23(1A), 41 or 42 and, if so, the basis on which he

does so;

whether the defendant relies on section 31A and, if so, the basis on which he does so; and

the terms of the new tenancy that the defendant would propose in the event that the

claimant’s claim to terminate the current tenancy fails.

Tenant’s application

When a landlord serves a notice under section 25 this may be met by a response from the tenant

wishing to obtain a new tenancy. The tenant is not required to serve a counter-notice on the

landlord (as was the case prior to 1 June 2004) but may make an application to court for a new

tenancy before the end of the period specified in the landlord’s notice. The tenant makes the

application for a new tenancy under section 24(1). 23

18

CPR r 56.3(2)(c)(ii) 19

CPR r 56.3(4) 20


CPR PD 56 para 3.13(1) 22

CPR PD 56 para 3.13(2) 23

Note that a landlord can also make an application for a new tenancy under section 24(1). However, as this paper is focused on obtaining possession I am presuming that the landlord in our hypothetical situation would not wish for a new tenancy to arise.


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If the landlord has indicated in the section 25 notice that he will raise a ground of objection under

section 30 then the application is ‘opposed’. If the landlord has indicated that he would not oppose a

new tenancy the application is treated as an ‘unopposed claim’.

Where the claim is opposed the tenant must use the Part 7 procedure24

Where the claim is unopposed the tenant must use the Part 8 procedure25

In addition to the ‘general’ particulars the tenant’s claim form must contain details of26:

the nature of the business carried on at the property

whether the claimant relies on section 23(1A), 41 or 42 and, if so, the basis on which he does

so

whether the claimant relies on section 31A and, if so, the basis on which he does so

whether any, and if so what part, of the property comprised in the tenancy is occupied

neither by the claimant nor by a person employed by the claimant for the purpose of the

claimant’s business

the claimant’s proposed terms of the new tenancy

the names and address of (a) anyone known to the claimant who has an interest in the

reversion in the property (whether immediate or in not more than 15 years) on the

termination of the claimant’s current tenancy and who is likely to be affected by the grant of

a new tenancy; or (b) if the claimant does not known of anyone specified by (a), anyone who

has a freehold interest in the property

In response to the tenant’s claim the landlord should file and serve an acknowledgment of service as

set out in CPR PD 56 para 3.10 (unopposed claim) or 3.12 (opposed claim).

Where the claim is opposed (which is the presumption for the purposes of this paper) the landlord

should file and serve an acknowledgment of service in form N9 (standard acknowledgment for Part 7

claims) and a defence.

In the defence the landlord must state27 with particulars:

the landlord’s grounds of opposition;

full details of those grounds of opposition;

whether, if a new tenancy is granted, the defendant objects to any of the terms proposed by

the claimant tenant and if so (i) the terms to which he objects and (ii) the terms that he

proposes in so far as they differ from those proposed by the claimant;

whether the defendant landlord is a tenant under a lease having less than 15 years

unexpired at the date of termination of the claimant’s current tenancy and, if so, the name

and address of any person who, to the knowledge of the defendant, has an interest in the

reversion in the property expectant (whether immediately or in not more than 15 years from

that date) on the termination of the defendant’s tenancy;

24

CPR r 56.3(4) 25

CPR r 56.3(3) 26


CPR PD 56 para 3.12


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the name and address of any person having an interest in the property who is likely to be

affected by the grant of the new tenancy; and

if the claimant’s current tenancy is one to which section 32(2) applies, whether the

defendant requires that any new tenancy shall be a tenancy of the whole of the property

comprised in the claimant’s current tenancy

Where the claim is an opposed claim the court will give directions as to the filing of evidence, and

the landlord will be required to file his evidence first.28

Grounds of opposition

Section 29 requires that the court shall make an order for the grant of a new tenancy unless the

landlord is able to establish, to the satisfaction of the court, any of the grounds in section 30.

The seven grounds under section 30 are:

(a) disrepair;

(b) persistent delay in paying rent;

(c) other substantial breaches of obligation;

(d) the landlord will provide suitable alternative accommodation for the tenant on

reasonable terms;

(e) where the current tenancy was created by sub-letting of part and the premises would

be more valuable as a whole;

(f) the landlord intends to demolish or reconstruct the premises and requires possession to

do so;

(g) the landlord intends to occupy the holding for his own purposes.

In relation to ground (g) it should be noted that the landlord cannot rely on this ground if his interest

was purchased or created less than five years before the termination of the current tenancy.

Grounds (f) and (g) both depend on the landlord proving an intention. Proof of intention is required

at the date of the hearing29 and the landlord is required to show a genuine, firm and settled

intention. The landlord also needs to show that there are no insuperable impediments; therefore

where planning permission is required the landlord must be able to establish that there is a

reasonable prospect that planning permission will be granted.

It is important that if a landlord is seeking to rely on grounds (f) and (g) there is a clear body of

evidence to support his position.

A ground of opposition will usually be tried as a preliminary issue, unless in the circumstances of the

case it is unreasonable to do so.30

28


Betty’s Cafes Ltd v Phillips Furnishing Stores Ltd [1959] AC 20 30

CPR PD 56 para 3.16


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(f) Compensation following eviction

If a landlord relies on grounds (e), (f) or (g) and either the court therefore refuses to grant a new

tenancy or the tenant does not apply for a new tenancy, the tenant may claim compensation.

Compensation is calculated in accordance with section 37(1) of the LTA.

It should also be noted that a tenant can claim compensation if the termination of a tenancy, or the

refusal to grant a new tenancy, is obtained or induced by misrepresentation or the concealment of

material facts: section 37A.

(III) Forfeiture

Forfeiture is, in itself, a very broad topic. I therefore summarise below the principle issues that can

arise in relation to commercial tenants.

(a) The right to forfeit

Most modern leases will have an express clause stating that the landlord has a right to re-enter the

premises in the event of any breach of the tenant’s covenants by the tenant or the tenant’s

insolvency. The lease will continue unless and until the landlord exercises the right to re-enter.31 The

law leans against forfeiture and therefore a landlord will be put to strict proof of his right to forfeit if

proceedings are commenced.

The law in relation to forfeiture broadly divides in two: (i) forfeiture as a result of non-payment of

rent and (ii) forfeiture for other breaches of covenant requiring section 146 notices.

Rent arrears

In order to forfeit a lease on the grounds of rent arrears the landlord must either have made a

formal demand for rent or else be exempted from making such a demand. Most re-entry clauses

provide that the landlord can exercise his right to re-enter for non-payment of rent “whether

formally demanded or not”.

Where there is no such provision in the lease then a formal demand is unnecessary provided section

210 of the Common Law Procedure Act 1852 (High Court) or section 139(1) of the County Courts Act

1984 (County Court) apply. Three conditions have to be satisfied: (i) one half-year’s rent is in arrears,

(ii) the lessor has a right to re-enter, and (iii) no sufficient distress is to be found on the premises.

If the conditions are not satisfied then a formal demand will need to be made. This is an archaic

procedure. A formal demand must be made on the land and, if relevant, at the front door. It should

be made to the tenant, or in his absence the occupier, or to no-one if the premises are unoccupied.

31

Arnsby v Woodward (1827) 6 B&C 519; Davenport v R (1877) 3 AppCas 115 at 128; Quesnel Forks Gold Mining Co Ltd v Ward [1920] AC 222


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The demand must be for no more than the sum due for rent for the last period for payment. The

demand must be made before sunset on the last day of payment, and be sustained until after

sunset.

There is no need to serve a section 146 notice in relation to rent arrears.32

Other breaches – section 146 notices

Before the landlord takes any steps to forfeit either by court proceedings or by peaceable re-entry

he must serve a statutory notice under section 146 of the Law of Property Act 1925. The failure to

serve such a notice will render the forfeiture void.33

The notice must34:

specify the breach complained of;

require the breach to be remedied, if this is possible; and

require the tenant to make compensation in money for the breach if the landlord requires

such compensation.

There is no prescribed form for a section 146 notice. A landlord must therefore simply ensure that

such a notice includes all the relevant information required by section 146(1).

It has been held that although section 146(1)(c) states that ‘in any case’ a landlord should include a

requirement for compensation, a landlord is not required to ask for compensation if he does not

want it.35

If there is more than one tenant the section 146 notice must be served on all of them. A sub-lessee

or mortgagee need not be served. A section 146 notice may be served under the general provisions

governing service in the LPA 1925.

It should be noted that if the covenant that has been breached is a repairing covenant then under

section 18(2) of the Landlord and Tenant Act 1927 the landlord is required to prove that the tenant

had knowledge of the service of the notice. Although section 18(2) also provides that the tenant will

be deemed to have knowledge of service if the notice is sent by registered post unless the contrary

is proved.

If following the service of a section 146 notice the tenant fails, within a reasonable time thereafter,

to remedy the breach and to make compensation for the breach then the landlord can proceed to

forfeit. A “reasonable time” depends on the facts of the case.

32

Section 146(11) LPA 1925 33

Re Riggs [1901] 2 KB 16 34

Section 146(1) LPA 35

Lock v Pearce [1893] 2 Ch 271


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Additional requirements if the Leasehold Property (Repairs) Act 1938 applies

If the breach complained of is a breach of a repairing obligation and the lease was granted for a term

of seven years or more and there are three years unexpired then there can be no action for

forfeiture if the tenant claims the benefit of the Leasehold Property (Repairs) Act 1938 by serving a

counter-notice. If such a counter-notice is served the landlord must seek leave from the court to

proceed with the forfeiture.

Where the tenant has such a right the section 146 notice must inform the tenant of the right to

serve a counter-notice under the 1938 Act and how to do so.36

Exceptions

By way of completeness sections 146(9)-(10) should be noted in relation to forfeiture on the basis of

insolvency. Section 146 notices are only required where the lease does not fall within the classes in

section 146(9) and if the tenant’s interest is sold within one year from the bankruptcy or taking in

execution. If the tenant’s interest is not sold before the expiration of that year, the section only

applies to forfeiture during that first year.

(b) Waiver

Waiver can be a particular issue with commercial tenants, especially where the landlord is minded to

take practical steps to try and preserve the status quo rather than being forced to issue possession

proceedings.

If the landlord waives a breach of covenant then he is unable to proceed to forfeit the lease. Waiver

can be express or implied. For waiver to be implied (i) the landlord must be aware of the acts or

omissions of the tenant which make the lease liable to be forfeited and (ii) the landlord must do

some unequivocal act which, objectively considered, recognises the continued existence of the

lease.

The most common way in which waiver occurs is by a landlord demanding or accepting rent falling

due after the breach of covenant relied on. Frequently landlords will attempt to accept rent but to

state that it was ‘without prejudice’ to the right to forfeit. However, it is settled law that this is not

sufficient in and of itself to avoid there being a waiver of the right to forfeit.37 It is a question of fact

whether money has been tendered and accepted as rent, but once proved this will in law amount to

a waiver regardless of the intention with which it was demanded or received.

36

Section 1(4) of the Leasehold Property (Repairs) Act 1938 37

Davenport v R (1877) 3 AppCas 115; Segal Securities v Thoseby [1963] 1 QB 887; Windmill Investments (London) v Milano Restaurant [1962] QB 373; Central Estates (Belgravia) Ltd v Woolgar (No. 2) [1972] 1 WLR 1048


15

By contrast if the landlord has accepted rent after proceedings for possession have been

commenced this will not constitute a waiver of the breach, as the issue of proceedings is deemed to

be a clear and unequivocal election by the landlord to determine the tenancy.38

A waiver of a covenant will only extend to the particular breach in question, and will not amount to a

general waiver in relation to all future breaches. If the breach is a continuing breach (for example

the breach of a repairing obligation) breaches that continue after the date of waiver will usually give

rise to a fresh right to forfeit. Further, a waiver of the right to forfeit does not equate to a waiver of

the right to sue for damages in relation to the breach of covenant.39

(c) Peaceable re-entry

If a landlord is entitled to re-enter the premises then he can enforce his right by making peaceable

re-entry or by commencing proceedings.

To constitute peaceable re-entry there must be some unequivocal act by the landlord. The usual

course of action is to change the locks.40 If there is a sub-tenant in the premises then the landlord

will only effect a peaceable re-entry if he enters into a new tenancy with that sub-tenant. Allowing

the sub-tenant to continue to remain in possession under the existing tenancy will not amount to

peaceable re-entry.41

In Billson v Residential Apartments Ltd [1992] 1 AC 494 at 536 Lord Templeman noted that peaceable

re-entry was a “dubious and dangerous method of determining a lease”.

The reason why peaceable re-entry can be dubious and dangerous is principally because of the

criminal sanctions that can be incurred under the Criminal Law Act 1977. Under section 6 of the CLA

1977 it is a criminal offence to use or threaten violence to secure entry into premise if:

(a) there is someone physically on the premises at the time who is opposed to the entry in

respect of which violence is threatened or used; and

(b) the person using or threatening violence knows this to be the case.

It is therefore usual for peaceable re-entry to take place outside of office hours.

In addition if commercial premises are also used as residential premises (for example a shop let with

first floor residential accommodation above) then a landlord cannot forfeit by peaceable re-entry.

Section 3 of the Protection from Eviction 1977 provides that it is not lawful for a landlord to recover

possession of premises in which a person is lawfully residing otherwise than by proceedings in court.

In Pirabakaran v Patel42 it was held that this applied to mixed leases.

In my view the better way to seek to forfeit a lease is therefore to commence possession

proceedings. There are three reasons for this:

38

Civil Service Co-operative Society Ltd v McGrigor’s Trustee [1923] 2 Ch 347 39

Stephens v Junior Army and Navy Stores Ltd [1914] 2 Ch 516; Norman v Simpson [1946] KB 158 at 160. 40

See eg Billson v Residential Apartments Ltd [1992] 1 AC 494 41

Ashton v Sobelman [1987] 1 WLR 177 42

[2006] EWCA Civ 685


16

it avoids difficulties that may result under the criminal law;

it has the advantage that the landlord initiates any proceedings that are commenced;

it avoids litigation that may ultimately be more costly.

(d) Court proceedings

Where the landlord takes possession by court proceedings the procedure is that set out in CPR Part

55.

There is no prescribed form for possession proceedings in relation to commercial premises (which

can be compared to the position with residential possession proceedings or possession actions

against trespassers). However, there are certain features of CPR Part 55 which it is important to bear

in mind.

A claim for possession must be started in the County Court for the district in which the land is

situated.43 The only circumstances in which claims can be started in the High Court are if there are

exceptional circumstances such as:44

complicated disputes of fact, or

points of law of general importance.

The claim form must be in form N5.

The particulars of claim must be filed and served with the claim form.45 The particulars of claim

must46:

comply with CPR Part 16 (i.e. they must contain a concise statement of facts and, if interest

is sought, give details)

identify the land to which the claim relates

state whether or not it is residential property

state the ground on which possession is claimed

give full details of the tenancy (also attach a copy of the tenancy)

give details of every person who, to the best of the claimant’s knowledge, is in possession of

the property

It is also good practice in my view, by comparison with the provisions relating to residential

premises, to give the name of any person known to be entitled to apply for relief from forfeiture. An

additional copy of the particulars of claim should be filed for service on such a person. This is not a

requirement under the current CPR and therefore is a tactical decision which will depend on the

circumstances of the case. However, it avoids subsequent applications being made by sub-tenants

which can interfere with disposals to third parties.

43

Civil Procedure Rules r 55.3(1) 44


CPR r 55.4 46

CPR PD 55 para 2.1


17

The court will fix a hearing date when it issues the claim form. In forfeiture claims this will be not less

than 28 days from the date of issue, and the defendant must be served with the claim form and

particulars of claim not less than 21 days before the hearing date.47

The defendant tenant is not required to file an acknowledgment of service. Further a defendant

does not need to file a defence within the usual time limits in CPR r 15.4 and may take part in a

hearing. However, the court may take into account a failure to file a defence when making a costs

order.48

Default judgment (CPR Part 12) does not apply in a possession claim brought under CPR Part 55.49

At a hearing the judge can either decide the claim or give case management directions. These

hearings are short (often no more than 5-10 minutes). If the claim for possession is clear then the

judge will make an order then and there. If the claim is genuinely disputed on grounds which appear

to be substantial then case management directions will be given.

To ensure that the Court will be in a position to dispose of the claim witness evidence should be

prepared evidencing the tenancy agreement, the breach relied upon, any notices that have been

served, and confirming that the breach has not been remedied. CPR r 55.8 provides that written

evidence can be relied upon but that all witness statements must be filed and served at least 2 days

before the hearing.

In my experience while CPR Part 55 does permit written evidence to be sufficient it is also beneficial

to have the person who made the witness statement present to give live evidence if necessary. This

has three advantages:

some district judges prefer to have evidence which is up-to-date at the time of the hearing.

A witness statement produced 2 days earlier will always be historic.

if the defendant tenant does attend and raises spurious points these can be more easily

dealt with if there is a witness present.

If the defendant tenant seeks relief (discussed below) the presence of a witness can assist in

negotiating terms.

(e) Relief from forfeiture

A landlord seeking possession of premises should always be aware that a tenant may apply for relief

from forfeiture. The issue of relief again broadly divides into two.

Rent arrears

The right to forfeit for non-payment of rent arrears is seen as security for the rent that is payable. It

therefore follows that in circumstances where a tenant pays all the rent owing and the costs of

bringing proceedings the Court will grant relief from forfeiture.

47

CPR r 55.5 48

CPR r 55.7(1) and (3) 49

CPR r 55.7(4)


18

This right to relief has been made ‘automatic’ by statute in certain cases. This has two important

consequences:

(i) if the tenant pays all the outstanding rent arrears and costs at any time before a trial in the

High Court (if at least half a year’s rent is in arrear)50 or not less than five clear days before

trial in the County Court51 (regardless of the amount of arrears) then the tenant has an

automatic statutory right to have the action discontinued and the lease will continue;

(ii) even when the landlord obtains an order for possession there will still be a right for the

tenant to apply for relief from forfeiture and to have the lease reinstated. In the County Court

this takes effect by the judge only being able to grant an order in form N27 which gives the

tenant a further four weeks to pay all of the outstanding rent and costs before the landlord

can recover possession. 52

An application for relief can either be made during proceedings by way of defence and counterclaim,

or after an order for possession has been made.

Even if the tenant is unable to pay all the arrears, he may still be able to avoid forfeiture by putting

forward a realistic time frame during which the rent will be paid.

To satisfy the Court that relief should be granted the tenant will have to show that he is able to pay

the sums outstanding, and that those sums will be paid within a reasonable time frame. The period

of time over which those sums should be paid is at the discretion of the judge. Relief will be granted

in such circumstances even if the tenant is insolvent or has a history of non-payment.

Where proceedings are in the High Court (in circumstances where the requirement for a formal

demand for rent has been dispensed with) an application for relief must be made within six months

of execution of the judgment.53 In all other cases the High Court has an equitable jurisdiction to

grant relief at any time, but is likely to adopt a similar time limit.54 In the County Court relief can be

granted at any time within six months of the date on which the landlord recovers possession.55 A

tenant who fails to apply within six months is barred from relief in either the High Court or the

County Court.

Other breaches

Relief must be sought while the landlord is proceeding by action or otherwise to forfeit the lease

(save for what is said below in relation to peaceable re-entry). A landlord is ‘proceeding’ at any time

50

Section 212 CLPA 1852 51

Section 138(2) CCA 1984 52

Section 138(3) CCA 1984 53

Sections 210-212 CLPA 1852 54

Howard v Fanshawe [1895] 2 Ch 581 55

Section 138(9A) CCA 1984


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from after he has served a section 146 notice until he has actually entered the premises pursuant to

a judgment of the Court.56

The Court can grant relief on such terms as it thinks fit. If relief is granted then the effect is to treat

the tenancy as if it had never been forfeited. If the breach has been remedied then the Court will

nearly always grant relief. However, the Court’s discretion is wide and there are no rigid rules for its

exercise.

Sub-tenants and mortgagees right to relief

Where a lease is forfeited any derivative interests, such as sub-leases and mortgages, will also come

to an end.

Where the landlord has begun proceedings against a tenant for non-payment of rent arrears a sub-

tenant or mortgagee can pay the arrears and costs in order to obtain relief.57 This has the

consequence that the lease will become retrospectively reinstated and will vest in the sub-tenant or

mortgagee instead of the tenant.58

Similarly in relation to other breaches sections 146(2) and (4) provide that a sub-tenant or

mortgagee can make an application for relief. This can either be an application for the term of the

tenancy (or a lesser term) to be vested in them, or for the grant of a wholly new lease on such terms

as the courts thinks fit. The Court has a discretion as to which form of relief to grant and the terms

on which to grant such relief.

(f) Tenant’s application for an injunction in cases of peaceable re-entry

Where a landlord has peaceably re-entered for non-payment of rent, the tenant should apply to the

County Court which can grant relief to the tenant if he applies at any time within six months of the

date of re-entry.59 An underlessee or mortgagee has a similar right.60

If the landlord effects peaceable re-entry for breaches of other covenants then the tenant can in

principle apply for relief without limitation as to time.61 Again an underlessee or mortgagee has a

similar right.62 In practice if the tenant delays unreasonably in making his application the court is

unlikely to exercise its discretion in his favour.

If a tenant makes such an application following peaceable re-entry by the landlord the normal form

is for a claim for relief to be made, and an application for an interim injunction to be made at the

56

Pakwood Transport Ltd v 15, Beauchamp Place Ltd (1977) 36 P&CR 112; Quilter v Mapleson (1882) 9 QBD 672; Rogers v Rice [1892] 2 Ch 170; Billson v Residential Apartments Ltd 57

Section 212 CLPA 1852; section 38(2) Supreme Court Act 1981; sections 138(5) and 140 CCA 1984 58

Section 38(2) SCA1981; section 138(5) CCA 1984; Escalus Properties Ltd v Robinson [1996] QC 231 59

Sections 139(2) and (3) CCA 1984 60

Sections 138(9C) and 139(3) CCA 1984 61

Billson v Residential Apartments Ltd 62

Section 146(4) LPA 1925


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same time to allow the tenant back into the premises pending the outcome of their application for

relief.

Louisa Nye

Landmark Chambers

September 2011

This seminar paper is made available for educational purposes only. The views expressed in it are

those of the author. The contents of this paper do not constitute legal advice and should not be

relied on as such advice. The author and Landmark Chambers accept no responsibility for the

continuing accuracy of the contents.


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Annex – Relevant forms etc.

http://www.legislation.gov.uk/uksi/2004/1005/images/uksi_20041005_en_001


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