Can Landlord Forfeit Lease for Deliberate Breach of Covenant?

Tenants who violate the terms of their leases can be forced to move. In one case, commercial tenants who sublet part of their premises to a Chinese restaurant without their landlord’s permission had their lease forfeited and were given six months to sell up and leave.

The tenants held a long lease in respect of a parade of shops with residential flats above them. The lease, which had been bought at a premium, yielded rack rent from sub-tenants of £133,000 a year and thus had considerable value.

Corporate Insolvency and Leasehold Property – Court Guidance

What happens to a company’s leasehold property interests if it becomes insolvent? In an important case, the High Court has tackled that issue in relation to a troubled restaurant chain and one of its flagship branches in Central London.

The company which ran the chain had gone into administration with an expected deficit of about £11 million. It held a 25-year lease on the branch which had 16 years left to run. The landlords wished to forfeit the lease and demise the premises to a new tenant at a substantially higher rent.

Landlord Exonerated in Repair Covenant Test Case

A landlord who takes on responsibility for repairing and maintaining premises is not obliged to improve them or even to ensure that they are safe. The Court of Appeal so ruled in a guideline case which arose in the context of a slipping accident on a flight of stairs which was not fitted with a handrail.

Victorian commercial premises had been let to a company in which the woman who fell had an interest. The lease was subject to a covenant by which the landlord promised to maintain and repair the building’s structure.

Landlords Pay Price for Breach of Right of Quiet Enjoyment

A recent case illustrates the risks landlords take if they refurbish tenanted buildings without taking sufficient account of the potential impact on their tenants.

Almost all commercial leases include a provision that tenants are entitled to occupy their premises in quiet enjoyment which means the right to occupy without interference or nuisance. In the case in question, the tenant of a modern art gallery whose premises were encased in scaffolding during noisy building works was awarded damages and a substantial rent rebate by a judge on account of the effect on its business.

Tenant Entitled to Relief from Forfeiture

If a landlord forfeits a lease on the grounds of rent arrears it is generally accepted that the tenant can apply for relief from forfeiture within six months of the date of forfeiture.

Providing the tenant pays all the arrears and the landlord’s costs and the application is made within six months, the tenant usually obtains relief from forfeiture and the lease is reinstated. This six month period can however cause problems for landlords as it creates a period of uncertainty before the property can be re-let without fear of the tenant applying for relief.

Landlord Succeeds in Establishing Breach of Subletting Covenant

Leases say what they mean. That was the conclusion of the Court of Appeal on a case about the interpretation of a covenant which set out the conditions on which a tenant could assign or underlet the property.

Our client landlord owned a freehold which comprised of a number of shops and office blocks and which was let under a 99 year commercial lease. The lease contained two particular sub clauses about underletting part of the property.