A recent Court of Appeal decision has confirmed that by exercising Commercial Rent Arrears Recovery (CRAR) a landlord had waived their right to forfeit a commercial lease for rent arrears.
In the case of Brar and another v Thirunavukkrasu, the lease contained a right to forfeit for unpaid rent. After the tenant fell into arrears, the landlord’s agent exercised CRAR over the tenant’s goods, and subsequently purported to forfeit the lease by peaceable re-entry. The tenant applied to Court for a declaration that the forfeiture was unlawful and also claimed damages for trespass and breach of covenant. After the County Court and High Court both found in favour of the tenant, the landlord appealed to the Court of Appeal, and it is this appeal that has recently been dismissed.
This case is a timely reminder to Landlords that they must tread carefully if there is any contemplation of forfeiting a commercial lease. Indeed, it is not unusual for both CRAR and forfeiture to feature in recommendations given by Solicitors as to how to deal with tenants who has fallen into rent arrears. This case must be borne in mind however given that if CRAR is exercised first then this is likely to affirm the continuation of the lease and as such will waive the right to forfeiture.
One way to deal with this decision is to ensure that leases are drafted so as to define the exercise of CRAR as an insolvency event, meaning that forfeiture remains a subsequent option. For any existing leases, it is essential that landlords carefully consider the precise wording in the lease before deciding what action to take where there are rent arrears.
Should you have any questions about the impact of this decision, or indeed would like more information about forfeiture and/or the CRAR process please contact David Low by email at djl@swinburnemaddison.co.uk or call 0191 384 2441.
