Tenant Entitled to Relief from Forfeiture

If a landlord forfeits a lease on the grounds of rent arrears it is generally accepted that the tenant can apply for relief from forfeiture within six months of the date of forfeiture.

Providing the tenant pays all the arrears and the landlord’s costs and the application is made within six months, the tenant usually obtains relief from forfeiture and the lease is reinstated. This six month period can however cause problems for landlords as it creates a period of uncertainty before the property can be re-let without fear of the tenant applying for relief.

In a recent case a tenant was granted relief despite a 14 month delay in making his application. The facts were unusual. The premises were  an MOT garage and workshop and the landlord had forfeited the underlease for arrears of £2155. However, the defendant company had a freezing order in place against it at the time, one of the directors had pleaded guilty to issuing MOT certificates without following procedures and another director was suffering from depression.

The court considered that the 14 month delay was a big issue but the restraint order, the lack of money and the fact that the director was suffering from depression were all factors which had to be put in the balance.

However the major issue in the court’s decision was the fact that the underlease had been granted for a premium of £90,000 at a ground rent of £100 per annum. The capital value of the underlease was approximately £275,000 and so the landlord had exercised its right to forfeit for a sum amounting to less than 1% of the capital value. It would therefore be disproportionate to grant the landlord a windfall and uphold the forfeiture.

The landlord had however incurred costs and interest of £24,530 by this stage and relief was only granted on payment of this sum.

(Pineport v Grangeglen)