Some aspects of the law of forfeiture
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This brief article, written by Christopher Buckingham , considers the law of forfeiture in the light of the recent High Court decision of The Tropical Zoo Limited v The Mayor and Burgesses of the London Borough of Hounslow [2024] EWHC 1240 (Ch).
It is nearly 40 years since the Law Commission concluded “The law of forfeiture has become unnecessarily complicated, is no longer coherent and gives rise to injustices.” (Codification of the Law of Landlord and Tenant: Forfeiture of Tenancies (1985) Law Com No 142). Despite that conclusion, and the later description in 2006 of the law as being “in urgent need of reform” (Law Com No 303), it remains unreformed, indeed, it is arguably more complex as new generations of judges have added to the creaking tower of case law.
In The Tropical Zoo Limited v The Mayor and Burgesses of the London Borough of Hounslow [2024] EWHC 1240 (Ch) Mrs Justice Bacon had to grapple with multiple aspects of the law of forfeiture in a lengthy but clear judgment. It is a useful case study of how the law can operate in practice.
The facts
The defendant Council granted a 125-year lease of 25 acres of land near Heathrow to the claimant Company. In the usual way there were clauses providing for the tenant to perform its covenants and a re-entry clause. There was also a Jervis v Harris-type clause requiring the tenant to remedy any breach within 2 months of notice, absent which to allow the landlord to enter to remedy the breach. Unusually (and perhaps uniquely) the lease imposed an obligation on the tenant to construct a Zoo Building within 2 years.
The claimant had funding issues and the Zoo wasn’t built within the two year period. More time passed, the Zoo did not appear and the defendant served notice on the claimant to remedy its breach; this it failed to do and a notice under s 146 of the Law of Property Act followed.
Following service of the s 146 notice, the defendant’s agents ceased to demand rent. The claimant continued to pay rent, however, all but three payments were promptly returned by the defendant’s agents (with the remaining payments being eventually returned).?
The claimant issued proceedings for declarations that it was not in breach of the lease, alternatively that any right to forfeit had been waived, failing which that relief should be granted in any event.
The main issues?
The first issue
The parties agreed that the claimant had breached its obligation to build the Zoo within two years and that rent was subsequently accepted thus waiving the breach. However, the defendant argued (and the Court accepted) that the failure to comply with the notice requiring the claimant to remedy its breach was freestanding as a matter of contractual construction. Accordingly, the defendant had been entitled to take steps to forfeit the lease despite several years having passed since the original breach of the obligation to build the Zoo (which, it was agreed, was a “once and for all breach”).
The second issue
The re-entry clause included the wording “the Landlord may (even if the Landlord has waived any previous right of re-entry) re-enter the Premises…” The defendant contended that the parentheses had the effect that an act that would otherwise amount to waiver does not prevent forfeiture of the lease pursuant to the clause, which was contested by the claimant either as a matter of construction or on the basis that a clause purporting to oust the common law doctrine of waiver could be of no legal effect.
The judgment contains (from paragraph 92) a helpful summary of the law of waiver of forfeiture (by no means the most straightforward of topics). The Judge held that, as a matter of construction, the clause did not purport to exclude the common law doctrine of waiver. More interesting (from a legal perspective) was the Judge’s obiter discussion on whether it is possible to “contract out” of the doctrine of waiver, which left the question very much open – a decision of the High Court of Australia giving effect to such a clause was described as carrying “some force”.
As indicated above, most rent payments were returned promptly by the defendant’s agents. Contrary to the defendant’s instructions, three payments were not returned immediately. The Judge accepted that an agent with actual or ostensible authority to make decisions as to the continuation of a lease following breach may waive forfeiture by accepting rent, even if instructed not to do so, and even if the acceptance is accidental (eg by an employee’s clerical error). It was held that the role of the defendant’s agents was limited to that of a treasury function and therefore they did not have the authority to make decisions as to the continuation of the lease. It was also held that on an objective assessment of the landlord’s conduct the delay (even though relatively significant) in returning the three payments could not be construed as the defendant waiving its right to forfeit.
Finally, in respect of waiver, the Court declined to follow New Zealand authority to the effect that no waiver can occur until there is an enforceable right to forfeit – requiring that any necessary notice under s 146 has been served and expired. Conversely, the Judge affirmed that waiver can occur prior to service or expiration of any s 146 notice.
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The third issue
Relief was sought by the claimant on the basis that it would commit to building the Zoo. In theory, the defendant did not oppose this but argued that the claimant had insufficient funds. As to principle, the Judge made the preliminary point at paragraph 149 “Relief from forfeiture is therefore discretionary, and the court must have regard to the individual circumstances of each case. But the discretion to grant relief is circumscribed by established principle and is not simply to be exercised in a way that the court considers fair on the particular facts…” She also pointed out that in granting relief conditional on the remedying of breach, that the court should ask itself whether there is a real likelihood, or real prospect, of the conditions being met (paragraph 170). Although not in wilful breach of the lease, the Judge concluded that there was not a real likelihood of the claimant being able to build the Zoo and therefore declined to grant relief from forfeiture.
Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational purposes. Readers are respectfully reminded that it is not intended to be a substitute for specific legal advice and should not be relied upon for this purpose. Please also note that this article represents the opinion of the author and does not necessarily reflect the view of any other member of St Philips Chambers.
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