Property Law uk

Maintained by Gary Webber

Waiver

CRAR

Exercise amounted to waiver

Thirunavukkrasu v Brar
[2018] EWHC 2461 (Ch)

Summary

The exercise of CRAR (Commercial Rent Arrears Recovery) under the Tribunals Courts and Enforcement Act 2007 (TCEA 2007) and the Taking Control of Goods Regulations 2013 (SI 2013/1894) after the tenant had failed to pay rent meant that the landlord had waived the right to forfeit for that breach.

Facts

Brar was the tenant under a 2013 lease for a term of 21 years. The lease provided that rent was payable in four equal quarterly instalments. It also contained a forfeiture clause which stated that:
    “The landlord may re-enter the property…at any time after…any rent is unpaid 21 days after becoming payable whether it has been formally demanded or not”.
Part of the quarter’s rent which fell due on 25 December 2015 went unpaid and so a right to forfeit arose 21 days later on 15 January 2016.

At some point in January 2016, the landlord instructed enforcement agents to use CRAR. On 1 February 2016, those agents entered the property and took goods for the stated arrears of £8,270, which sum was paid to the landlord on 17 February 2016. Meanwhile, on 12 February, the landlord forfeited the lease by peaceable re-entry.

The tenant claimed that forfeiture was unlawful because the exercise of CRAR acknowledged the continued existence of the lease after the right to forfeit had arisen. At first instance, the judge agreed. The landlord appealed.

Issues
  • Was CRAR the equivalent of distress with regard to waiver?
  • Had CRAR in fact been levied given that an ‘enforcement’ notice may not have been served?
  • Could the landlord rely on the exception to be found in s210 Common Law Procedure Act 1852?
Decision

The court was clear that, at common law, where the right to forfeit arises, it can be lost through waiver where the landlord:
  • Knows of the tenant’s breach;
  • Does something that unequivocally recognizes the continued existence of the lease (e.g. accepting/demanding rent, exercising inspection rights, serving notices etc.); and
  • Communicates that act to the tenant.
On the 1st issue that court had no hesitation in accepting that the common law rules on waiver applied just as much to CRAR as to distress. The TCEA 2007, s71 abolished the common law remedy of distress but did not specifically state that CRAR was its replacement; nor did it say anything about waiver or election, which continued to be governed by the common law.

S79(3) TCEA 2007 provided that CRAR continued to be exercisable after the lease had ended in relation to rent due and payable before the end of the lease if the conditions in s79(4) were met. Those conditions were not met in this case. Therefore, CRAR could only be exercised while the lease continued. Consequently, the exercise of CRAR contained an unequivocal representation that the lease was continuing.

On the 2nd issue, the court did not consider that any failure to serve an ‘enforcement’ notice could substantiate the landlord’s claim that CRAR had not been exercised.

On the 3rd issue, the court looked at s210 Common Law Procedure Act 1852 which provides for "proceedings in ejectment" to be brought for non-payment of rent by service of a writ if one half year’s rent is in arrears. Any ability of the landlords to rely on s210 was entirely theoretical, because proceedings under this provision had not been commenced. Instead, the landlord had sought to forfeit the lease. They might have been able to commence ejectment proceedings under s210 instead of seeking to forfeit the lease at common law by way of re-entry, and had they done so their prior use of CRAR would not have precluded their right to forfeiture, but that had not been the action they had chosen.


Once and for all breach

To do something within a particular time

Channel Hotels and Properties (UK) Ltd v Tamimi
[2004] EWCA Civ 1072.

This case concerned the development of the roof space above a block of flats. A breach of a covenant to carry out the development as expeditiously as possible was a once and for all breach. If a covenant is one to do something by a particular date, including a covenant to repair by such a date, that is a covenant which can be broken only once. The same applies to a covenant to do something within a reasonable time. (Farimani v Gates [1984] 2 EGLR 66 applied). In this case it was possible to point to a time by which the works, if carried out and completed as expeditiously as possible, should have been completed. The landlord had waived its right to forfeit by demanding and accepting rent (as well as other conduct).


Acceptance of cheque

To secure dismissal of bankruptcy proceedings

Osibanjo v Seahive Investments Ltd
[2008] EWCA Civ 1282

Summary

The Court of Appeal has held that acceptance of a cheque tendered by the tenant in part to secure the dismissal of bankruptcy proceedings, did not amount to an act of waiver of the right to forfeit.

Facts

T was the tenant of commercial premises under the terms of a lease dated 15 April 1998 for a term of years expiring on 25 March 2014. L was the landlord.

T fell into arrears of rent and L served a statutory demand in respect of those arrears. L subsequently issued a bankruptcy petition based on the arrears. After the issue of the petition, L became aware of breaches of the alienation, user and alterations covenants. Subsequently, T tendered a cheque to L for £10,000 and stated that the cheque was:
    “.. to discharge the outstanding Bankruptcy sum and the remainder as part payment for arrears of rent.”
The outstanding bankruptcy debt amounted to £3,414.80. L banked the cheque, retained the £3,414.80 and a week later returned the balance of £6,585.20 to T stating in its covering letter:
    “For the avoidance of doubt the clearance of your cheque through this firm's client account should not be regarded as a waiver by our client of his right to forfeit the lease.”
Issues

The questions before the court were whether the following actions amounted to waiver of the right to forfeit for the fresh breaches of covenant:
  • The banking of the cheque.
  • The commencement and pursuit of the bankruptcy proceedings.
  • The acceptance of the monies to discharge the bankruptcy debt.
The court at first instance held that none of the above steps amounted to waiver. T appealed.

Decision

The Court of Appeal dismissed the appeal. Mummery LJ gave the main judgement of the court. He said that acceptance of the cheque of itself did not amount to waiver.

Firstly it was not possible to accept the monies for the bankruptcy debt without banking the cheque, the basis for the division of the monies having been made clear both by T in tendering and by L in returning the balance. There was no ground for supposing that the amount repaid by L had been accepted by it as rent.

Secondly, the court said, the processing of the cheque itself is not conclusive evidence that the payment was accepted as rent
    “..the processing of the cheque is not in itself conclusive of the question whether the payment was accepted as rent. The processing is evidence of payment to Seahive, but for waiver of forfeiture it must also be shown that the payment was accepted and that it was accepted as rent by the landlord. In this case only part of the sum realised by the processing of the cheque was accepted. That sum related to the bankruptcy debt, which Mr Osibanjo paid in order to secure the dismissal of the bankruptcy petition. It was accepted on that basis and it was used to achieve that end. In my judgment, that was not an acceptance of the balance by Seahive as rent.” (para 22)
In addition, the court held that the issue of the bankruptcy proceedings could not be treated as waiver as they had been issued before L knew of the fresh breaches, and if continuing such proceedings could be a waiver, then it would never be possible to forfeit for bankruptcy.

Mummery LJ declined to express an opinion as to whether acceptance of monies to discharge the bankruptcy debt could amount to waiver. Rix LJ went on to state, obiter, that he considered that acceptance of rent that accrued due before a fresh breach has taken place but is accepted after the breach had occurred could amount to waiver of the right to forfeit for the fresh breach. However, that problem did not arise here as the court had found that the money tendered was not accepted as rent.

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