Applications for relief from forfeiture: the sooner, the better.

By Laura Smallwood

 

In Keshwala v Bhalsod [2021] EWCA Civ 492, the Court of Appeal, overturning a decision of the High Court, has held that there is no legal principle that an application for relief from forfeiture made within 6 months of re-entry will be deemed to have been made reasonably promptly.

 

Background

S.139(2) of the County Courts Act 1984 enables a tenant to apply for relief against forfeiture for non-payment of rent within 6 months after peaceable re-entry.  The issue in this case was whether a delay of less than 6 months could be relevant to the grant of relief.  The High Court judgment was reviewed in Guildford Chambers’ webinar ‘Landlord & Tenant: Useful cases from 2020’ in February, with the caveat that an appeal was pending.

 

The Facts

The tenants had a 20-year lease of a lock up shop with residential accommodation above.  On 13^th September 2018 following a £500 underpayment of the June quarter’s rent, the landlords forfeited the lease by peaceable re-entry.  On 4^th February 2019 the landlords relet the commercial and residential parts of the premises under separate leases.  On 26^th February 2019 the tenants issued an application for relief from forfeiture.

In the County Court, relief was refused  on the grounds that the equitable discretion to grant relief should not be exercised due to the delay of over 5 months in applying.  On appeal the High Court held that as the tenants had applied for relief within 6 months after the forfeiture, they should be treated as having applied with reasonable promptitude.  The delay in applying until nearly the end of the 6-month window was not capable of amounting to exceptional circumstances so as to defeat the claim for relief.  The landlords appealed.

 

The Court of Appeal’s decision

• Most of the authorities concerned delay in seeking relief beyond 6 months under the Court’s equitable jurisdiction, but there were repeated indications in the authorities that a tenant who leaves it to the end of the 6-month window will not necessarily be taken to have acted promptly, and such a delay can be a relevant factor;

 

• Therefore there is no principle that a tenant will be deemed to have acted with reasonable promptitude so long as an application for relief is made before the expiry of 6 months. Accordingly the judge had erred in finding that the tenants’ delay was of no relevance;

 

• Relief from forfeiture for non-payment of rent after peaceable re-entry is discretionary and is based on equitable principles. These include that the right of re-entry is security for the payment of rent and, other things being equal, relief will ordinarily be granted if the tenant pays all sums due;

 

• However, although the mere fact of delay by itself is unlikely to be sufficient cause for refusing  relief where the landlord has taken possession and done nothing with the premises, the longer the delay, the more likely it is that the Court will conclude that the tenant has not acted in a timely manner, and that intervening events will make relief inequitable.  The lack of any good explanation for the delay and failure to keep the landlord informed are aggravating factors in this respect;

 

• If the landlord has altered his position acting reasonably and not precipitously, or if third party rights have intervened, it may be unjust to grant relief.

 

Practical Implications

For tenants:

• Any application for relief from forfeiture should be made as soon as possible to maximise chances of success; the longer the delay, the greater the risk of refusal;

 

• It is important both clearly to signal an intention to seek relief to the landlord and to keep the landlord informed in order to guard against an alteration in position by either the landlord or third parties which may make it unjust to grant relief.

 

• Where there has been a delay in applying for relief, this must be fully explained.

For landlords:

• Provided that he acts reasonably and ‘not precipitously’, a landlord can safely proceed to relet during the 6-month window.

Generally:

• The judgment contains a useful summary of the framework applicable for relief from forfeiture for non-payment of rent, the rules for which depend on whether re-entry is by court order or peaceable re-entry, whether the application is made in the High Court or County Court, and whether the court is exercising a statutory or equitable jurisdiction (paragraphs 36 to 42).

 

If you require advice, or representation, in a claim relating to land or property you can instruct Laura Smallwood by contacting her clerks on 01483 539131 or emailing them at clerks@guildfordchambers.com

 

Disclaimer

This article has been provided free of charge for information purposes only. Although care is taken to ensure the information is accurate no responsibility is assumed by the author or any member of Guildford Chambers for reliance on the content or the accuracy of such content. The information, and/or commentary, does not constitute legal advice and if you have a legal dispute you should seek advice from a solicitor or barrister about your case. Accordingly, no member of Chambers shall be responsible for any action you take or refrain from taking in reliance of anything in this article or case summary.