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Commercial landlords – Rent or possession?

Posted on 29 October 2018 by Bhavani Hogarty

Commercial landlords – Rent or possession?

It has been a tough year for the retail sector this year, with many retail tenants falling into arrears. When managing their portfolios, commercial landlords need to consider their remedies in such situations but in particular, landlords need to decide whether in any given situation, which of the remedies available they would like to pursue, in particular, whether the priority is to recover rent or get the premises back?

The right to forfeit is usually found in commercial leases and provides the landlord with the ability to bring a lease to an end upon the tenant’s default and in the case of non payment of rent, a landlord can exercise his right to forfeit without notice to the tenant. If the landlord decides he wants the lease back then he must ensure he does not waive his right to forfeit the lease.

The recent case of Thirunavukkrasu v Brar & Brar [2018] EWHC 2461 (Ch) serves as a useful reminder that the landlord must carefully consider its objective before taking any enforcement action. In this case, Thirunavukkrasu was the tenant of the premises in Teddington, Middlesex and Brars were the landlords. The rent was due quarterly and the tenant failed to pay the December 2015 quarter’s rent. The landlords decided to exercise their rights under the Commercial Rent Arrears Recovery regime (known as “CRAR)” being a statutory regime which allows a landlord of commercial premises to recover rent arrears by taking control of a tenant’s goods at the leased premises and, if the arrears are not paid, by selling them. CRAR requires notice to be given to the tenant and a certified enforcement agent needs to be engaged to attend the premises to take control of the goods.

The landlords exercised CRAR on 1 February 2016 and subsequently purported to exercise the right to forfeit for non payment of rent on 12 February 2016. One of the issues before the County Court, which was then considered by the High Court on appeal, was whether the exercising of CRAR waived the right to forfeit.

A landlord can waive a right to forfeit for a “once and for all breach” (e.g. non payment of rent on the due date) by unequivocally confirming the existence of the lease and communicating this to the tenant. The County Court and subsequently the High Court held that exercising CRAR amounted to a waiver of the right to forfeit. In the Judge’s words: “exercise of CRAR… contained an unequivocal representation that the lease was continuing”. Therefore the forfeiture of the lease was unlawful.

This decision serves as a useful reminder to landlords when faced with a tenant in arrears. Recovering rent and being able to forfeit are not mutually exclusive but careful consideration needs to be given and advice obtained on the potential of waiver to avoid a lengthy and expensive mistake as demonstrated in the Thirunavukkrasu case.
 

Posted in: Landlord & Tenant/Housing, Commercial Property, Lettings/Landlord & Tenant