Rent Arrears And Forfeiture – A Complex Predicament

Thirunavukkrasu v Brar [2019] EWCA Civ 2032

Summary

This case considered whether the exercise of Commercial Rent Arrears Recovery ("CRAR") under the Tribunals, Courts and Enforcements Act 2007 (the "Act") waives the right of a commercial landlord to forfeit a lease for the rent arrears.

Background

Thirunavukkrasu was the tenant of commercial retail premises in Teddington (the "Property"). The Brars were the landlords pursuant to a Lease dated 10 July 2013 (the "Lease"). Under the Lease an annual rent of £15,000 was due on quarterly days in advance on 25 March, 24 June, 29 September and 25 December. The permitted use of the Property was as a retail shop. The Lease contained a proviso for re-entry if rent was unpaid for 21 days after becoming due.

The rent due on 25 December 2015 was not paid. On 18 January 2016 the Landlord instructed enforcement agents to exercise CRAR. On 1 February 2016 the enforcement agents went to the Property and took control of the Tenant's goods in order to recover arrears and fees totalling £10,533.20. On 12 February 2016 the Lease was purportedly forfeited by the Landlord by peaceable re entry. On 15 February 2016 the Landlord received £8,270 from the enforcement agents.

Issues

CRAR enables a landlord to instruct an enforcement agent to take control of the goods of a tenant of commercial premises and to sell the tenant's goods in order to recover the rent arrears.

Various previously decided cases established that a landlord levying distress (a common law remedy similar to CRAR which was replaced by CRAR in 2014) would waive the right to forfeit.

First Instance

Proceedings were issued by the Tenant who argued that the forfeiture was unlawful and claimed damages for trespass and breach of covenant as well as damages for the conversion of the goods that were subject to the CRAR.

Specifically, the Tenant argued that in exercising CRAR the Landlord had unequivocally acknowledged the continuing existence of the lease and, therefore, had waived their right to forfeit for non-payment of any sums due up to and including the quarter's rent that fell due on 25 December 2015.

Her Honour Judge Baucher sitting in the County Court in Central London ordered that there be a trial of the preliminary issue of whether or not the Landlord's supposed forfeiture of the Lease was lawful or not. Judge Madge held that where a right to forfeit arises, the Landlord has to make an election. Judge Madge held that just as distress for rent was...