In 1981 the tenant was granted a lease for 125 years of a commercial unit for a premium of £90,000. The tenant agreed to pay £100 in ground rent, insurance premiums and service charge contributions. The current value of the leasehold interest was £275,000. The unit was used by the tenant to provide MOT services. In April 2014 the landlord forfeited the lease by peaceable re-entry based on unpaid ground rent, service charges and other sums. The tenant did not apply for relief from forfeiture until 14 months later. 

By way of further background, due to the fraudulent issue of MOT certificates by the tenant, a freezing order was made against it and one of its shareholders. The aforementioned shareholder had also been sent to prison in March 2016 for 18 months. He claimed to have been suffering depression in the period leading to the forfeiture.

The court has equitable power to grant relief to a tenant, usually once it is satisfied the tenant can pay the arrears and any costs the landlord has incurred in recovering those arrears. The court  acknowledged that the very lengthy period of delay was a matter of great difficulty for the tenant to overcome. The court had to consider whether the application was made promptly and took into consideration the guideline period of 6 months. The landlord argued that 14 months was a significant delay and was reason enough for the court to refuse relief.  It also argued that the delay had caused significant prejudice by increasing its costs and expenses.

The court considered that there was an explanation for the long delay. It arose from a combination of:  

• The effects of the shareholder’s depression;
• The freeing order order;
• Lack of money;
• The absence of specialist advice.  

The court also took into consideration;  

• The steps the tenant was taking to raise funds to pay the arrears and costs;
• The value of the lease (at the time of the hearing £275k) compared to the outstanding arrears (£24k) being disproportionate, meaning the landlord would be getting a windfall if relief was refused;
• The lack of prejudice to the landlord as a result of the late payment and the delayed relief application; and
• The landlord’s failure to market/re-let or grant a new long lease of the property.

The court's discretion to grant relief is a broad one and the court is not constrained by a fixed time limit preventing it from granting relief. Although 14 months is more than double the guide period of six months, the court was satisfied that it was wrong to bar the tenant from obtaining relief in these particular circumstances. 

Therefore, the court concluded that the tenant’s application was made with reasonable “promptitude” and granted relief, provided the arrears and landlord’s costs were paid by a certain date.

Taking back property by peaceable re-entry is an uncertain step as the tenant (and its mortgagee if applicable) can make an application for relief at any point and this may be at a time when the landlord has re-let the property.

If a landlord has re-entered and gets no response from the tenant, it might be possible to obtain an undertaking from the outgoing tenant that it will not seek relief, to take away the uncertainty that an application may be made in the future. Unfortunately, without an undertaking, the landlord and any new tenant are in uncertain territory. It may be safer to apply for a court order rather than taking peaceable re-entry even if the tenant has vacated the premises.

Pineport Ltd –v- Grangeglen Ltd [2016] EWHC 1318 (Ch) (13 June 2016)