Does waiver preclude a landlord from obtaining a determination of the breach?
10th November 2021
10th November 2021
As you will likely know, a landlord who wishes to forfeit a lease for a breach by the leaseholder (for any matter other than rent arrears) is required by s.168(2) Commonhold and Leasehold Reform Act 2002 (“CLRA”) (or by s.81 of the Housing Act 1996 where the breach is non-payment of service charges) to first either provide evidence that the breach claimed has been admitted by the leaseholder or obtain, in the Court or Tribunal, a determination of that claimed breach.
In the Upper Tribunal case from October this year of Bedford -v Paragon ASRA Housing Limited  UKUT 266 (LC), on appeal from the First Tier Tribunal (“FTT”), the question arose as to whether the Tribunal has jurisdiction to make a determination pursuant to section 168 CLRA where the right to forfeit the lease had been waived.
The lease of the property in question (a shared ownership leasehold house) contained an absolute covenant by the tenant not to underlet the property. Guidance issued by central government required housing associations to include such a prohibition in shared ownership leases to protect public funds and to ensure that properties let on a shared ownership basis were not exploited for commercial gain.
In 2010, just a short time after acquiring the property, Mr Bedford sub-let it as he was to be based in the USA for a short period in order to pursue a career (as a professional rugby player). He sought and obtained Paragon’s permission to the sub-letting on the specific assurance that he would return to the property at the end of the following year. He did not return, however, and continued to rent the property year on year, and even after the issue of the proceedings in this claim.
Despite being aware (in or about 2018) of the breach of covenant by sub-letting, Paragon did not make a decision to forfeit Mr Bedford’s lease until May 2020 and it continued to collect rent from Mr Bedford by monthly direct debit between December 2018 and May 2020.
Paragon did, however, issue proceedings in July 2020 for a determination that the continuing sub-letting after the initial licence period amounted to a breach of the terms of the lease. In response to the claim Mr Bedford filed an application to strike out Paragon’s claim on the grounds that, if the right of forfeiture for the breach claimed has been waived then, the claim for the determination of the breach amounts to an abuse of process as it serves no purpose. In other words, there would be no point obtaining the determination as the landlord could not then enforce it by forfeiture, if that right has been waived.
The FTT rejected the strike out application and found that Mr Bedford “has, at some time after the end of 2011, and certainly no later than September 2018, and on a number of occasions between, sublet the property without permission and in breach of clause 3(15) of the lease.”.
Mr Bedford appealed to the Upper Tribunal (“UT”) on the grounds that the FTT had been wrong to consider that the availability of potential remedies other than forfeiture justified the refusal of the application to strike out the proceedings (and another ground).
The UT dismissed Mr Bedford’s appeal.
The UT considered that it was not actually clear (on the limited facts submitted by Mr Bedford in relation to the tenancies that he had granted) whether Paragon had actually waived its right of forfeiture - there being a question as to whether Paragon were in fact aware of the continuing sub-letting after the initial period agreed in 2010. In any event, and even if the right of forfeit had been waived, the UT considered that that would not mean that the determination proceedings under s.168 CLRA served no purpose. The UT considered that forfeiture was not the only remedy following a determination of the breach and that Paragon could seek an injunction (see here) or damages as an alternative remedy, none of which diminished or negated entirely the value and relevance of the s.168 determination.
There are two main points arising from this case.
Prior to granting consent for anything, no matter the circumstances, the Landlord/RMC/RTM should double check that it can and should be granting the consent in the first instance (see also here and here) . Plainly, Paragon probably should not have permitted the first sub-letting as without that consent this case, and certainly the defences put forward in response to it, would not have arisen.
Obtaining a determination pursuant to section s.168 CLRA is, almost always, going to be the main initial focus upon becoming aware of a breach. Clearly, this case shows that even if forfeiture is not, or no longer, available to the landlord, RTM or RMC, it remains a worthwhile direction. It is, however, always worth obtaining advice at an early stage both in relation to what is, in the specific circumstances of any case, the best way forward, and to ensure that all relevant protections are in place to preserve to the claiming party all possible rights that might exist in respect of any claim (or any claim for costs arising therefrom). See here our article on the Perils of Waiver .
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