#10262 - Lease Landlord's Remedies For Tenant Breaches

Effluxion of Time P.327	Where a fixed term lease automatically comes to an end No notice is required
Notice to Quit P.328	Periodic tenancies are determined by an appropriate period of notice It can be given by either the LL or the T Notice periods are strictly enforced and courts will not grant relief: Yearly tenancies: at least 6 months’ notice Other tenancies: one full period’s notice If a dwelling house, notice given 4 weeks before effect, in writing and with certain information (s.5 Protection from Eviction Act 1977)
Surrender P.328	Where T yields up his lease to immediate LL who accepts the surrender It must be by deed to be legal (s.52 LPA) and must be mutual
Merger P.328	Where T acquired the immediate reversion of a lease (i.e. the freehold) Or where a 3^rd P acquired both the lease and the reversion

Notice to Quit

P.328

Periodic tenancies are determined by an appropriate period of notice
It can be given by either the LL or the T
Notice periods are strictly enforced and courts will not grant relief:
- Yearly tenancies: at least 6 months’ notice
- Other tenancies: one full period’s notice
If a dwelling house, notice given 4 weeks before effect, in writing and with certain information (s.5 Protection from Eviction Act 1977)

Surrender

P.328

Where T yields up his lease to immediate LL who accepts the surrender
It must be by deed to be legal (s.52 LPA) and must be mutual

Merger

P.328

Where T acquired the immediate reversion of a lease (i.e. the freehold)
Or where a 3^rd P acquired both the lease and the reversion

But, if the lease falls within the remit of the Landlord and Tenant Act 1954, then it may be protected from determination under security of tenure. This means the tenant can continue in their tenancy until it is terminated in such a way that is satisfactory under the Act. This does not apply to T@W.

LL’s Remedies: T’s Non-Payment of Rent

Important questions before applying any of these remedies:

Find the clauses in the Lease that have been breached (usually all the rent clauses)
Calculate for how long the T has not paid rent
Calculate the amount of rent owed to the LL + interests (interest accrue usually 14 days after unpaid rent)
Does the LL have AGA’s with previous T’s? Are there any Guarantors?

Debt Action against Tenant or Former Tenant / guarantors P.329 Liability of former T’s P.327	Apply to court to recover the debt from the Tenant: If suing a former Tenant (such as under an AGA), or a guarantor then LL must unders.17 LTCA ’95 (this section of the act applies to ALL leases (new and old)): 1. serve a Default Notice on the former tenant (Default Notice on P.327); 2. within 6 months of the rent falling due. Otherwise the LL will not be able to recover from the former T or Guarantor. The LL doesn’t need to start proceedings, the LL is just serving notice of the breach Must sue within 6 years of the rent falling due (s.19 LA ’80)	Advantages: - Plenty of time to bring the action against T - A debt action is more easily enforceable
Forfeiture of the Lease P.329 If rent is payable quarterly then the year’s quarter dates are: 25 March; 24 June; 29 Sept; 25 December	An article for forfeiture is usually contained within the terms of the lease “e.g. any rent reserved by this lease is outstanding for twenty one days after becoming payable (whether formally demanded or not)..” This right must be expressly reserved by the lessor in clause within the lease. Right to take possession and prematurely determine the lease Enforced by either: A court order (which is obligatory if it’s a dwelling house – s.2 PEA) Peaceable re-entry (criminal sanctions for using violence – s.6 CLA ‘77) T may apply to court for release for forfeiture whereupon the court will have the discretion to allow the lease to continue, but usually only under the condition that T pays all the arrears and costs. Court order may be required to apply Forfeiture in residential lettings. The LL’s right to forfeit may be waived by carrying out any act demonstrating an intention to continue the relationship of LL & T (e.g. demanding or accepting rent from T after the breach) See the flowcharts on the BOOK	Advantages: - LL can terminate the lease early and bring in a new T
Disadvantages: - If peaceful re-entry is not possible, it will be expensive to get a court order due to costs. - The forfeiture clause must be included in the lease to be possible to use it. - The T may apply to court to be released from forfeiture - if LL accepts rent LL may forfeit its right to forfeiture.
CRAR (formerly Distress) P.330	Allows LL to enter the premises and seize goods on the commercial premises and sell them to recover the rent (can’t be sued for residential) This is not commonly used now because of the Human Rights issues. Distress was replaced by Commercial Rent Arrears Recovery CRAR on 6 April 2014. Using CRAR will waive any right to forfeit that may have arisen. Therefore, before exercising CRAR, the LL should consider carefully: Whether it will matter that any right to forfeit will be lost in consequence; How the LL will deal with any existing breaches of the lease (other than non-payment). PROCEDURE: by s.77 TCEA 2007, the following conditions must be satisfied: T must be in arrears for minimum 7 days before notice of enforcement is given (reg. 52, TCGR ‘13). LL gives notice to T at least 7 days before CRAR is exercised (no Sunday Holiday). Amount in arrears must be certain or capable of being calculated with certainty. Only an enforcement agent can exercise CRAR on behalf of LL (parag. 2, Sch 12, TCEA 2007).	Advantages: - May be able to recover the debt before secured creditors in case of T being subject to insolvency
Disadvantages: - T may need the seized property for trading = make an income = repay LL due rent = only making matters worse for everyone. - May end up badly due to the emotional charge involved in seizing somebody else’s property.

Debt Action against Tenant or Former Tenant / guarantors

P.329

Liability of former T’s P.327

Apply to court to recover the debt from the Tenant:
If suing a former Tenant (such as under an AGA), or a guarantor then LL must unders.17 LTCA ’95 (this section of the act applies to ALL leases (new and old)):

1. serve a Default Notice on the former tenant (Default Notice on P.327);

2. within 6 months of the rent falling due.

Otherwise the LL will not be able to recover from the former T or Guarantor. The LL doesn’t need to start proceedings, the LL is just serving notice of the breach

Must sue within 6 years of the rent falling due (s.19 LA ’80)

Advantages:

- Plenty of time to bring the action against T

- A debt action is more easily enforceable

Disadvantages:

- High costs of litigation

- but remember that summary judgment may make things easier.

Forfeiture of the Lease

P.329

If rent is payable quarterly then the year’s quarter dates are:

25 March;

24 June;

29 Sept;

25 December

An article for forfeiture is usually contained within the terms of the lease “e.g. any rent reserved by this lease is outstanding for twenty one days after becoming payable (whether formally demanded or not)..”
This right must be expressly reserved by the lessor in clause within the lease.
Right to take possession and prematurely determine the lease
Enforced by either:
1. A court order (which is obligatory if it’s a dwelling house – s.2 PEA)
2. Peaceable re-entry (criminal sanctions for using violence – s.6 CLA ‘77)
T may apply to court for release for forfeiture whereupon the court will have the discretion to allow the lease to continue, but usually only under the condition that T pays all the arrears and costs. Court order may be required to apply Forfeiture in residential lettings.
The LL’s right to forfeit may be waived by carrying out any act demonstrating an intention to continue the relationship of LL & T (e.g. demanding or accepting rent from T after the breach)
See the flowcharts on the BOOK

Advantages:

- LL can terminate the lease early and bring in a new T

Disadvantages:

- If peaceful re-entry is not possible, it will be expensive to get a court order due to costs.

- The forfeiture clause must be included in the lease to be possible to use it.

- The T may apply to court to be released from forfeiture

- if LL accepts rent LL may forfeit its right to forfeiture.

CRAR (formerly Distress)

P.330

Allows LL to enter the premises and seize goods on the commercial premises and sell them to recover the rent (can’t be sued for residential)
This is not commonly used now because of the Human Rights issues. Distress was replaced by Commercial Rent Arrears Recovery CRAR on 6 April 2014.
Using CRAR will waive any right to forfeit that may have arisen. Therefore, before exercising CRAR, the LL should consider carefully:

Whether it will matter that any right to forfeit will be lost in consequence;
How the LL will deal with any existing breaches of the lease (other than non-payment).

PROCEDURE: by s.77 TCEA 2007, the following conditions must be satisfied:

T must be in arrears for minimum 7 days before notice of enforcement is given (reg. 52, TCGR ‘13).
LL gives notice to T at least 7 days before CRAR is exercised (no Sunday Holiday).
Amount in arrears must be certain or capable of being calculated with certainty.
Only an enforcement agent can exercise CRAR on behalf of LL (parag. 2, Sch 12, TCEA 2007).

Advantages:

- May be able to recover the debt before secured creditors in case of T being subject to insolvency

Disadvantages:

- T may need the seized property for trading = make an income = repay LL due rent = only making matters worse for everyone.

- May end up badly due to the emotional charge involved in seizing somebody else’s property.

Collect from Sub-T	section 6 of the Law of Distress Amendment Act 1908 (LDAA 1908). s.6 LDAA 1908 entitles a LL, whose immediate T is in arrears of rent, to serve a notice on an undertenant, requiring it to pay the underlease rent directly to the head LL until the arrears set out in the notice have been paid. If further arrears accrue, another notice under s. 6 of the LDAA 1908 must be served, to recover them from an undertenant. the underT asked to sign and return the notice as acknowledgment of receipt.
Bankruptcy and Winding-up (i.e. insolvency procedings)	Bring an action for : the bankruptcy of the individual tenant if the tenant is an individual; or the insolvency (winding up) of a the Co. if the tenant is a Co. Threshold: Rent has to be more than 750 for a T to serve a statutory demand on the LL LL’ are unsecured creditors and must consider whether there are any secured creditors or any priority creditors meaning that LL may not get any money back!	Advantages: - If T has no other creditors in case of insolvency LL may recover easily.
Disadvantages: - If T has secured creditors in insolvency LL is fuc* LL is unsecured.
Negotiate with T	LL can negotiate to get from T a promise to surrender the lease early if T is unable to pay rent by a certain date. LL can avoid painful litigation and can use any AGA’s or Guarantors to help him persuade the T to enter into the early surrender of lease agreement.	Advantages negotiate with T to promise to surrender lease early. Use AGA & Guarantor to pressure.

Collect from

Sub-T

section 6 of the Law of Distress Amendment Act 1908 (LDAA 1908).
s.6 LDAA 1908 entitles a LL, whose immediate T is in arrears of rent, to serve a notice on an undertenant, requiring it to pay the underlease rent directly to the head LL until the arrears set out in the notice have been paid. If further arrears accrue, another notice under s. 6 of the LDAA 1908 must be served, to recover them from an undertenant.
the underT asked to sign and return the notice as acknowledgment of receipt.

Bankruptcy and Winding-up

(i.e. insolvency procedings)

Bring an action for :

the bankruptcy of the individual tenant if the tenant is an individual; or
the insolvency (winding up) of a the Co. if the tenant is a Co.

Threshold: Rent has to be more than 750 for a T to serve a statutory demand on the LL
LL’ are unsecured creditors and must consider whether there are any secured creditors or any priority creditors meaning that LL may not get any money back!

Advantages:

- If T has no other creditors in case of insolvency LL may recover easily.

Disadvantages:

- If T has secured creditors in insolvency LL is fuc* LL is unsecured.

Negotiate with T

LL can negotiate to get from T a promise to surrender the lease early if T is unable to pay rent by a certain date. LL can avoid painful litigation and can use any AGA’s or Guarantors to help him persuade the T to enter into the early surrender of lease agreement.

Advantages negotiate with T to promise to surrender lease early. Use AGA & Guarantor to pressure.

Tenant Breaches Other (Non-Rent) Covenants

Claim for Damages: may be awarded under the principle of Hadley v Baxendale (loss naturally flowing from the breach)

Damages for repair covenants are capped at the “reduction in value of LL’s reversion as caused by the breach” – s.18 LTA ’27 – which may ultimately be less than the cost of the repairs.
The lease may also be caught by the Leasehold Property (repairs) Act 1938 (only applies to leases granted for more than 7 years with more than 3 years left to run) In order to sue for damages LL must:

Serve notice to the T
Inform T of right to serve a counter-notice within 28 days

If counter-notice is served, court will only allow LL to proceed if:

the value of the reversion has indeed reduced substantially and/or
the breach needs to be remedied immediately or
there are other special circumstances

Specific Performance Order: where damaged are inadequate (this is granted by the court only when other remedies are not appropriate or available)
Injunction: the enforce compliance with a restrictive covenant
Forfeiture: as above, but see the specific flowchart (See flowchart P.332 for special rules on repair covenant) Forfeiture is only available as a remedy to the LL if there is an express clause reserving that right in the lease. It is often phrased “the Landlord’s right to re-entry. NOTE that there is a difference between the right to forfeiture for non-payment and the right to forfeiture for other breaches which follows the statutory procedure under s.146...

#10262 - Lease Landlord's Remedies For Tenant Breaches - Property Law and Practice

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