Lawbite: Forfeiture: the Court of Appeal considers the importance of promptness in applications for relief

• United Kingdom

• Litigation and dispute management
• Real estate
• Real estate litigation - LawBite

20-05-2021

Keshwala and another v Bhalsod and another [2021] EWCA Civ 492

The Court of Appeal recently offered some clarity on what constitutes promptness where it comes to a tenant’s application for relief from forfeiture affected by peaceable re-entry.

The tenants held a twenty-year lease of mixed use premises expiring in December 2028. On 13 September 2018, the lease was forfeited by peaceable re-entry on the basis of a rental underpayment of £500. In early February 2019 the landlords re-let the commercial and residential parts as separate units to new tenants.

On 26 February 2019, more than five months after the lease was forfeited, the tenants made an application to the County Court for relief from forfeiture.

The case then travelled from County Court to High Court and concluded in this decision in the Court of Appeal.  The key question before each court was whether or not the tenant’s application had been made promptly. 

The County Court concluded that it had not. This, together with the fact that a) no good reason had been given for the delay, b) the landlord had largely been kept in the dark on the tenant’s intentions during that period, and, c) the subsequent lettings to third parties, led to the Court’s decision to refuse relief. 

On appeal, the High Court thought otherwise. It considered that applications made within six months of forfeiture should be treated as having been made with “reasonable promptitude”. It therefore concluded that delay wasn’t a factor in this case, and overturned the County Court’s decision.

The Court of Appeal acknowledged that s.139(2) of the County Courts Act 1984 gave the County Court the jurisdiction to grant relief where forfeiture was affected by re-entry for non-payment of rent and the application for relief is made within six month of forfeiture. This didn’t, however, mean that applications for relief made within six-months of forfeiture were automatically deemed to have been made reasonably promptly. The County Court has a discretion as to whether to grant relief, and this discretion has to be exercised applying equitable principles, delay being a factor in this.

The Court of Appeal decided that the High Court was wrong to have disturbed the exercise of the County Court Judge’s discretion, and restored the original decision refusing relief.

Key points

• there is no strict legal principle that says that applications for relief made within six-months are deemed to have been made promptly where forfeiture is by peaceable re-entry for non-payment of rent
• the later a tenant or tenants make an application for relief from forfeiture (especially if there is no good reason for the delay and/or the landlord is not kept informed of the intention to seek relief), the greater the likelihood that the court will reject it, particularly if intervening events (such as re-letting to a third party) make relief inequitable
• a helpful reminder that the law surrounding relief from forfeiture turns on a number of variables, including the grounds for forfeiture (non-payment of rent or other breach), the method used to forfeit (court proceedings or peaceable re-entry) and the court in which the application is made (County Court or High Court). The applicable legal framework is relevant not only when applying for relief but also when reading and applying the authorities surrounding the issue