Forfeiture

We have all heard the maxim “He who comes to equity must come with clean hands” but this is one maxim that is not reflected truly in Relief of Forfeiture matters. It appears that failing to comply with a property’s leasehold covenants does not automatically allow forfeiture of that property to be granted.

The most common cause of forfeiture matters being brought to the Court’s attention is property owners failing to pay the ground rent charge, ground rent and service charge due to the Lessor. This breach and build up of arrears enables the Lessor to apply for forfeiture of the property to which the lease applies. In the majority of matters the Lessor can forfeit the property by re-entering peaceably and thereafter the Lessee can then apply for Relief against Forfeiture.

Any reasonable man or woman would agree that paying the bills, working all the hours of the day, raising children and caring for pets can be the most difficult and time consuming tasks which easily allow us to become distracted from the minor agreements we make when purchasing our dream home. The odd missed payment, although not ideal, can be resolved however when the missed payments becomes a regular occurrence this soon impacts on the Lessor and action can rightfully be taken.

It is important to highlight that the Lessor is expected to act in good faith and prompt payment by the Lessee when missed rather than overwhelm the Court with Forfeiture matters instantaneously.

The most recent ruling on the 13th June 2016 by Chief Master Marsh explained why even the most serious of Forfeitures matters are relieved for the Lessee:

 Pineport limited v Grangeglen Limited [2016] EWHC 1318(Ch) involved the granting of an under lease to the Claimant when he purchased the property/unit as part of his MOT business. The under lease required the Claimants to:

Pay the ground rent of £100 per annum
Pay a sum equivalent to the amount the Defendnat required to insure the unit
Pay a service charge as per clause 4 of the under lease
Not to use the unit for any illegal or immoral purpose

The Claimant became a Defendant in criminal proceedings when the Vehicle and Operations Service Agency became aware that he was issuing MOT certificates without completing the correct process. The claimant did not pay the ground rent and service charges as covenanted in the under lease and soon fell into arrears. The amount of arrears on forfeiture was £2,155. 14 months after forfeiture the Claimant made an application for Relief against Forfeiture. This was granted by Chief Master Marsh some 12 months later.

 

The court must consider:

The delay in the Claimant making their application for relief- must be ‘reasonable promptitude by the claimant.’
Whether the Defendant can be placed back in the position they were prior to the arrears. Provided the Lessor can be put in the same position as before, the Lessee us entitled to be relieved against forfeiture on payment of the rent and any expenses.
Can the arrears be repaid? Without the confirmation of payment relief will not be granted. Relief is only granted with conditions. The loss must be repaid within the ‘immediate foreseeable future’ and have sufficient evidence of the same.
The balance between the arrears due to the Defendant and amount they would receive should forfeiture be upheld compared to the impact on the Claimant. Once the defendant has received the arrears that was all they were entitled to and no more. The court found that the refusal of relief gave the Defendant a bigger advantage and gain that they needed.
Exceptional Circumstances. The court should consider any other non monetary breaches especially serious breaches such as illegal activity. Although this should be considered it is not a bar to relief being granted. The Court must review the likelihood of repeat behaviour from the Claimant.

All in all the Court has and always will lean heavily more towards favouring the Claimant for granting relief which many believe contradicts justice and the maxim first mentioned. The Defendant must show that the Claimant has abused this advantage given by the Court dramatically but how dramatic is yet to be determined.