For commercial landlords, it will be important to consider what impact their actions in recovering arrears could have upon their rights.
The High Court has held that a landlord waived its right to forfeit a lease for rent arrears when it attempted recovery by the Commercial Rent Arrears Recovery (CRAR) process.
Replacing the common law right of distress, CRAR allows commercial landlords to take control of a tenant’s goods and sell them to recover arrears. To use CRAR, a landlord must serve notice of its intention to do so seven clear days before seizing the goods.
In this case, the lease gave the landlord a right to forfeit where any rent became unpaid beyond 21 days after due. There had been arrears for over 21 days and the landlord successfully used CRAR to recover. During this process, the landlord also attempted to exercise its right to forfeiture by peaceable re-entry.
The tenant claimed forfeiture to be unlawful because the exercise of CRAR acknowledged the continued existence of the lease after the right to forfeit had arisen. At first instance, the judge agreed. The landlord appealed. On appeal the High Court also agreed. It was held that CRAR does not change the usual common law principle that where a landlord knows to have a right to forfeit a lease, they can waive and lose such right by acting in a way that unequivocally treats the lease as continuing: the most common example being when a landlord demands or accepts rent knowing there to be a forfeitable breach of the lease terms by the tenant. By demanding or accepting payment in such circumstance, they are treating the lease as continuing and thereby waiving the right to forfeit. By using CRAR, the landlord had elected to treat the lease as continuing and so had lost its right to forfeit.
The landlord could have acted differently. The landlord could have waited until after the lease had come to an end before using CRAR which is allowable in some circumstances. Alternatively they could have waited until the next breach had come about and then exercised its rights.
Interestingly the High Court considered the ability for a landlord to rely on section 210 of the Common Law Procedure Act 1852 instead. Under this section if one half year’s rent is in arrears and the landlord is able to enter for non payment, it can instead, serve a ‘writ in ejectment’ for recovery of the premises instead of forfeiting. The court did not consider this in much detail as it was not relevant.
The case reiterates the importance for landlords to act consistently in their dealings with tenants.
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