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Enforcement action for arrears – a useful reminder for landlords

Although company voluntary arrangements have stolen the headlines this year, there are many other tenants, particularly those in the retail sector that are not seeking to reduce their rents but simply falling into arrears.  This presents a significant headache for landlords trying to manage their property portfolios.

There are a number of remedies available to landlords who find themselves in this situation including:

• Forfeiture: A right to forfeit is invariably found in commercial leases and provides a landlord with the ability to bring a lease to an end upon the tenant’s default.  In the case of non-payment of rent, a landlord can exercise its right to forfeit without notice to the tenant.

• Commercial Rent Arrears Recovery regime: CRAR is a statutory regime which allows a landlord of commercial premises to recover rent arrears by taking control of a tenant’s goods at the leased premises and, if the arrears are not paid, selling them.  CRAR requires notice to be given to the tenant and a certified enforcement agent needs to be engaged to attend the premises to take control of the goods.

However, landlords need to be careful how they pick and choose these remedies as otherwise they risk prejudicing their own position.  The recent case of Thirunavukkrasu v Brar & Brar [2018] EWHC 2461 (Ch) serves as a useful reminder that before taking any enforcement action against a tenant for arrears, landlords should first consider whether their priority is to get paid or get the premises back.

In the case, Thirunavukkrasu was the tenant of premises in Teddington, Middlesex and the Brars were the landlord.  The rent was due quarterly and the tenant had failed to pay the December 2015 quarter’s rent.  The landlords decided to exercise CRAR on 1 February 2016 and subsequently purported to exercise their right to forfeit for non-payment of rent on 12 February 2016.  One of the issues before the County Court, which was then considered by the High Court on appeal, was whether exercising CRAR waived the right to forfeit.

A landlord can waive a right to forfeit for a “once and for all breach” (like not paying rent on the due date) by unequivocally confirming the existence of the lease and communicating this to the tenant.  The County Court and subsequently the High Court held that exercising CRAR amounted to a waiver of the right to forfeit.  In the judge’s words, the “exercise of CRAR… contained an unequivocal representation that the lease was continuing”.  Therefore the forfeiture of the lease was unlawful.

This decision serves as a useful reminder for landlords when faced with a tenant in arrears. Exercising one form of enforcement action may scupper their ability to take other steps at a later date.

Whenever a landlord is considering forfeiting a lease, it is important to obtain advice on how best to proceed.  As the case of Thirunavukkrasu demonstrates, a mistake can lead to a lengthy and expensive legal dispute, which all landlords would rather avoid.