RED alert - Spring 2019 – 7 / 7 观点
The Court of Appeal has confirmed that a section 146 notice can only be served after a right to forfeit the lease has arisen in accordance with the forfeiture provisions in the lease.
Mrs Ruberry was the tenant of a pub, The Queens Arms, of which Mr Toms was the landlord pursuant to a lease dated 22 April 2015 (referred to as a "business development agreement").
As with most commercial leases, the tenant was required to comply with various obligations to repair and decorate the pub. The lease also gave the landlord the ability to re-enter and forfeit where the tenant failed to remedy a breach within 14 days of receiving a written notice from the landlord, referred to as a "default notice".
A default notice was served by the landlord on the tenant enclosing a report prepared by the landlord's surveyor. A statutory notice pursuant to section 146 of the Law of Property Act 1925 was also served on the tenant. The fact that the tenant was in breach of the lease was not disputed.
At first instance, it was held that the landlord was not entitled to serve a section 146 notice until the default notice had been served and a period of 14 days had expired without the breaches being remedied. It was only after that point that the landlord's right of re-entry had arisen.
Section 146(1) of the Law of Property Act 1925 states that "[a] right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice…".
Section 146(1) does not expressly confirm when such a notice can be served.
The landlord argued that it was only the breach of covenant itself that needed to have occurred before a right of re-entry arose, rather than the contractual right of entry specified in the default notice. In response, the tenant argued that the judge's decision at first instance was valid and should be upheld.
The Court of Appeal held that a section 146 notice can only be served after the breach of covenant or condition triggering the right of re-entry. On these facts, this date would need to be after the expiry of a default notice. The Court went on further to state that a section 146 notice is to be served on the basis that the right of forfeiture is otherwise enforceable when the notice is given.
This case is a helpful reminder of the importance of ensuring that procedural steps required by both the lease and statute are carefully complied with to ensure that a right of forfeiture is exercised properly.
Given the severe consequences for a tenant if its lease is forfeited, as well as the unusual drafting in the lease, it is unsurprising that the Court of Appeal found in favour of the tenant on these facts. In any event, had the forfeiture been successful, it is likely that the tenant would have sought relief if it was able to remedy the default complained of.
As a result, at the time of writing, The Queens Arms continues to serve its local community.