Leases and relief from forfeiture
The High Court recently declined a commercial tenant's application for relief from forfeiture in a case involving a local authority. Philip Coates explains why.
On 24 May 2024, the High Court refused a commercial tenant's application for relief from forfeiture of their lease emphasising the importance of complying with lease obligations.
In March 2012, Hounslow London Borough Council (Hounslow) granted Tropical Zoo Ltd (Tropical) a 125-year lease of 25 acres of land near to Heathrow airport (the Lease). The Lease was granted on the basis that Tropical would construct a zoo and education centre on the land of within two years.
Tropical made several attempts to obtain funding for their zoo project, but they were unsuccessful and instead decided to run a farm on the site.
As the zoo remained unbuilt, in 2020 Hounslow served two notices under Section 146 of the Law of Property Act 1925 which required Tropical to remedy its breaches of the Lease. This therefore triggered the right of forfeiture of the Lease.
In August 2022, Tropical initiated proceedings which included a claim for relief from forfeiture on the basis that the lease was not liable to be forfeited as Hounslow had waived the right to forfeiture by continuing to accept rent. Following commencement of Tropical's proceedings, Hounslow defended the claim as they believed that they had not waied their right to forfeiture and so the court should not grant Tropical relief.
In response to the relief claim, Hounslow also issued a claim for possession in the County Court which was stayed pending the outcome of Tropical's relief claim.
Following a five-day trial, the High Court held in Tropical Zoo Ltd v Mayor and Burgesses of the London Borough of Hounslow [2024] EWHC 1240 (Ch) that Hounslow were entitled to forfeit the lease and Tropical should not be granted relief.
The reasoning for their decision was as follows:
- On interpreting the relevant Lease clauses, the court decided that Tropical's failure to comply with the notices served in 2020 triggered a right of forfeiture as this was specifically stated within the Lease;
- The court also decided that Hounslow's actions were consistent with the terms that were set out in the Lease and they did not act in a way which waived their right of forfeiture; and
- By accepting rent following service of the notices, the court decided that this did not constitute a waiver of the right to forfeiture because this did not imply Hounslow's acceptance of Tropical's breaches of the Lease.
This case highlights the importance of constructing and interpreting lease clauses accurately so that the parties involved fully understand their rights and obligations. It also acts as a reminder that parties should abide by their obligations under their lease agreements, otherwise there can be major consequences.
Philip Coates is an Associate at Trowers & Hamlins.
