A case decided towards the end of 2011 has highlighted the fact
that the exercise of a peaceable right of re-entry by a landlord does
not necessarily mean the end of a Lease. This is something which
a lot of landlords will not be aware of, and something they certainly
need to take into account, especially where they are intending to
immediately re-let the premises.
The case involved various elements but essentially centred around
an incomplete renewal of lease process, an incorrect cancellation
of the lease, and an action by the tenant for relief against
cancellation and relief against the landlord’s refusal to renew the
lease. Following discussions around a proposed renewal of lease,
the landlord wrote to the tenant recording that a renewal had been
requested, and advising that documentation would follow shortly. A
new lease was prepared but was incorrect. The new lease was
never signed and the tenant remained in occupation until after
expiry of the then current term.
The tenant fell into arrears of rent and the landlord served the
requisite notice under Section 245 of the Property Law Act 2007
(the “Act”), purporting to cancel the lease and exercise a right of
re-entry. The tenant managed to pay the arrears of rent to the
landlord’s solicitor just before the notice period expired, but the
landlord’s solicitor did not realise the payment had been received
until after the landlord had peaceably re-entered the property.
Prior to the tenant raising its action, the landlord offered to allow
the tenant to resume its lease on the condition that the tenant
accepted the premises in their then current state – i.e. without
fittings. The tenant refused.
The tenant made an application under Section 253 of the Act
against the cancellation, and under Section 264 of the Act against
the landlord’s refusal to renew the lease. The tenant also asked the
Court to use its discretion under Section 256(1) of the Act to make
it a condition of the requested order of relief that the landlord
reinstate the premises to their fitted-out condition. The tenant was
successful on all three counts.
The aspect of the case that we want to draw your particular
attention to is the fact that Section 253 of the Act allows tenants
(and mortgagees and receivers) to apply for relief against
cancellation of a lease by a landlord on the grounds of a breach of
covenant or condition of a lease, up to three months after the date
the landlord peaceably re-entered the property.
As mentioned above, the landlord’s purported cancellation in this
particular case was actually void (because the arrears of rent had
been paid off prior to expiry of the relevant notice period) but, for
the purposes of the Act, it would not necessarily have made any
difference if the cancellation had been valid/correct. In fact, it is
worth noting that in determining whether or not to grant an
application for relief against cancellation under Section 253 of the
Act, Section 256 of the Act states that the Court may grant relief
even though:
• The cancellation is for a breach of an essential term of the lease;
or
• The breach is not capable of being remedied.
Clearly, these provisions could have significant ramifications for a
landlord who has cancelled a lease and peaceably re-entered the
premises with the intention of seeking a new tenant. Obviously, it
will not be an issue in all circumstances – often it is very clear
that a tenant will do nothing about a landlord validly exercising a
right of cancellation – but it is definitely something worth bearing
in mind, especially where the parties may have already been in
dispute over purported tenant’s breaches and/or the landlords right
to cancel.
