Most commercial leases have a clause which entitles a landlord to terminate the lease by forfeiture if the tenant breaches its obligations. Once the right to forfeit arises, if a landlord acts in a way so as to treat the lease as if it is continuing, for example, by demanding or accepting rent, the landlord is said to have waived the breach and therefore loses its right to forfeiture.
Commercial Rent Arrears Recovery (CRAR) is a process which enables commercial landlords to take control of a tenant’s goods and sell them to recover rent arrears.
Saravnanthan Thirunavukkrasu vs. Baljit Singh Brar & Another (September 2018)
The High Court has recently dealt with a case where a tenant was in rent arrears and the landlord instructed enforcement agents to use the CRAR procedure. The enforcement agents entered the property and seized goods to the value of the arrears; the tenant subsequently paid the outstanding sum due.
However, whilst the CRAR procedure was on-going, the landlord entered the property to forfeit the lease by peaceable re-entry. The tenant claimed the forfeiture was unlawful because, in exercising the CRAR procedure, the landlord had waived its right to forfeit the lease.
The High Court agreed with the tenant and held that in the circumstances of this case the CRAR procedure could only be exercised if the lease was still in existence. In choosing to adopt the CRAR procedure the landlord had elected to treat the lease as continuing, thereby losing its right to forfeit the lease. The forfeiture was therefore unlawful and damages and costs were awarded against the landlord. Ouch!
It is essential that, when considering enforcement action against a defaulting tenant, the landlord carefully considers the options available to it and takes legal advice as to those options at the earliest opportunity.
If you require any further information or guidance on this issue please do not hesitate to contact Marcella Cox on [email protected] or by telephone on 020 8427 9080.