#10235 - Forfeiture Leases Model Answer - Property Law and Practice

Clause 7 – Landlord can forfeit (enter Premises and end lease), and not breach any of his covenants in the process, in these circumstances:

• Rent is outstanding for 20 working days days (Clause 7.1)

• Tenant or Guarantor breach any of the covenants (Clause 7.2)

• (Clause 7.3.1) Guarantor or Tenant has an Administration Order against him

• (Clause 7.3.2) Court makes winding up order against Tenant or Guarantor

• (Clause 7.3.3) A receiver on Admin receiver or manag. receiver is appointed against

• (Clause 7.3.4) Is struck out of the Register of Co.s

• (Clause 7.3.5) is unable to pay its debts under section 123 of Insolvency Act 1986

• Etc…. LOOK AT YOUR LEASE

If Mini Mee breaches rent covenant – based on p330 flowchart

• What is the rent?

  • Clause 1.1 (Definitions) – “Principal Rent” Clause 3 The “Rent” and “VAT”

  • Clause 4.4 - Any payment or consideration to LL is exclusive of VAT

• Forfeiture clause covering non-payment of rent? – Yes. Clause 7

• Formal demand necessary? – No. Clause 7.1 (“whether or not formally demanded”)

• Mini Mee has failed to pay – Peaceful re-entry (Clause 7.5) – ends lease

• If Mini Mee pays in arrears and asks Landlord for relief, Chloe has to apply to court to carry on with the same lease. If relief is granted by Landlord without an application to the court, a new lease is created (Zestcrest Ltd v County Hall Green Ventures Ltd). This could be a problem for Landlord as they will not have a chance to contract out of security of tenure. Although there is no clause in this contract which does that anyway

If Mini Mee breaches other covenant – based on p331 flowchart

• Forfeiture clause covering breach of Chloe’s covenants? – Yes. Clause 7

• Landlord needs to serve s146 LPA 1925 notice which:

  • Specifies breach;

  • Requires it to be remedied if capable of remedy; and

  • Requires compensation if desired and,

  • Mini Mee’s right to serve a counter-notice within 28 days

• Mini Mee must be allowed a reasonable time in which to remedy the breach

• If Mini Mee doesn’t remedy breach, LL can forfeit the lease by peaceful re-entry (Clause 7.5) or applying to the court for a court order.

• Mini Mee may apply to the court for relief against forfeiture and the court may grant such relief as it sees fit (s146 LPA)

Additional rules for breach of repair covenant

• Forfeiture clause covering breach of Tenant’s covenants? – Yes. Clause 7

• Does Leasehold Property (Repairs) Act 1938 apply?

  • Is the originally granted term longer than 7 years? – Yes (10 years) Schedule 1A LR6. – Term = 10 years

  • Is there at least 3 years unexpired? - Yes Lease expires in 2020

• If it Act 1938 applies: –

  • Landlord serves...