Waiver

Topics covered on this page:

  • Exercise of commercial rent arrears recovery amounts to waiver.
  • Once and for all breach - to do something within a particular time.
  • Acceptance of cheque to secure dismissal of bankruptcy proceedings.

 

CRAR

Waiver of right to forfeit by exercise of CRAR

Brar v Thirunavukkrasu

[2019] EWCA Civ 2032

Summary

The exercise of CRAR (Commercial Rent Arrears Recovery) under the Tribunals Courts and Enforcement Act 2007 (2007 Act) 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 the failure to pay that rent.

Facts

This case concerns a 21-year lease of commercial retail property entered into between the parties in 2013.  The lease provides that rent is payable in four equal quarterly instalments. It also contains a forfeiture clause which states 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”.

The tenant failed to pay part of the quarter’s rent which fell due on 25 December 2015:

  • 25 December 2015 – rent not paid;
  • 15 January 2016 – ‘days of grace’ expire and right to forfeit arises;
  • 18 January 2016 – enforcement agents instructed to exercise CRAR;
  • 1 February 2016 – enforcement agents take control of tenant’s goods for arrears (£8,270) + fees – in total £10,533.20;
  • 4 February 2016 – sum paid in full by tenant to enforcement agents;
  • 12 February 2016 – landlord purports to exercise peaceable re-entry;
  • 17 February 2016 – landlord receives £8,270 monies from enforcement agents.

The tenant claimed that forfeiture was unlawful because the exercise of CRAR, after the right to forfeit, arose acknowledged the continued existence of the lease and meant the landlord had waived the right to forfeit for the December arrears.

Issues

The landlord argued that:

  1. The exercise of CRAR does not act as a waiver of the right to forfeit and the previous authorities on distress were not binding on the Court of Appeal;
  2. As the exercise of CRAR was invalid (for lack of notification) waiver had not taken place as there was no unequivocal representation that the lease continued to exist;
  3. That the landlord relied on the exception to be found in s210 of the Common Law Procedure Act 1852.

First instance

Both the County Court and the High Court on a first appeal agreed that the exercise of CRAR operated as a waiver of the right to forfeit.

Decision on appeal

  1. The Court of Appeal rejected the first argument – that the exercise of CRAR was not an unequivocal act affirming the existence of the lease but, instead, a “neutral act” – considering it be “flawed on several grounds”, not least because the effect of s79(4)(a) of the 2007 Act is that CRAR can never be exercised when a lease has been brought to an end by forfeiture and indeed CRAR can only be exercised by a landlord.
  2. As to the second argument the Court of Appeal considered there to be “no merit in this ground of appeal”. The court considered that the High Court was perfectly entitled to form the view that the tenant “knew that CRAR had been commenced by [the landlord] by the presence of the enforcement agents [at the property]”, notwithstanding the fact that no formal notice had been given to the tenant. The court added that the entry onto the premises of the enforcement agents was itself a waiver – it was “consistent only with an intention on the part of the appellants to treat the lease as continuing because they plainly intended to exercise CRAR.”
  3. As to the third argument that where at least 6 months’ rent is in arrear there can be no waiver by CRAR because of the effect of s210 of the Common Law Procedure Act 1852, the Court of Appeal said that this “would not only amount to substantially re-writing section 210 but it would mean that that this fundamental point on waiver has been overlooked by all lessors and courts since 1852 and by all academic and other commentators on the law relating to tenancies since that time” and was not “seriously arguable”.

Comment

 This case makes it clear that the exercise of CRAR will waive the right to forfeit the lease in respect of the arrears that were subject to the CRAR.

 

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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