Waiver of Forfeiture

When a landlord is aware that a tenant has committed a breach of covenant which, under the terms of the lease, entitles the landlord to terminate the lease and recover possession, the landlord is put to an election. It must either accept the breach and proceed to forfeit the lease or it may waive the breach and, with it, waive the right to forfeit.

Waiver can occur either by an express statement from the landlord or as a matter of law where the landlord takes some action which is only consistent with the continuation of the lease. A very common example of waiver arising by operation of law is where a landlord accepts rent which has fallen due after the relevant breach of covenant.

In Tropical Zoo Ltd v Hounslow LBC [2024] EWHC 1240 (Ch), the claimant tenant sought a declaration that the defendant landlord had waived its right to forfeiture. The lease required the claimant to construct a zoo within a prescribed period of time. That was not done and the defendant indicated that it intended to forfeit the lease. It instructed its agents not to accept further rent from the claimant so as to preserve the right to forfeit. The claimant nonetheless continued to pay the rent to the agents as and when it fell due under the terms of the lease. The agents returned most of those payments immediately, but, in three cases, there was a delay of between three and eight months in returning the payments. The claimant contended that, having retained the rent for such lengthy periods of time, the right to forfeiture had been waived.

The High Court rejected that argument. The continued payment of rent by the claimant was “purely a tactic to attempt to engineer a situation of waiver of forfeiture”. Whilst an unreasonable delay in returning rent could amount to a waiver of the right to forfeit, the delays in returning the payments had arisen because of errors on the part of the agents and the bank (e.g. incorrect account number for repayment) and did not amount to waiver.

 

Oliver Kew

Published on 01/07/2024

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