03 February 2021
Waiver of right to forfeit a commercial lease - case decision
The recent decision of Lewison LJ in Faiz -v- Burnley Borough Council  EWCA Civ 55 clarified an important aspect of the law relating to forfeiture and waiver. A waiver takes place where the landlord demands or accepts rent which accrued due after the date of a breach known to the landlord.
The facts in this case were as follows. Burnley Borough Council had granted a lease of a café at a historic country house in Lancashire. The lease contained an absolute covenant against sub-letting. At some point in early October 2019, the tenant granted a sub-lease of the café. On 18 October 2019, the tenant informed the landlord of the sub-lease. On 4 November 2019, the Council issued a demand for insurance rent, which was paid (and accepted) on 11 November 2019.
The issue was whether the demand and acceptance of rent on 11 November 2019 with knowledge of the breach amounted to a waiver where the rent accrued due after the breach, but before the Council had knowledge of it.
After consideration of several decisions and after consulting material from prominent textbooks, Lewison LJ found that the question is whether the rent accrued before or after the date of the breach which the landlord had knowledge.
On the facts of the case, Lewison LJ found that the acceptance of the payment for insurance rent on 11 November 2019 did not amount to a waiver of the forfeiture. This was because the invoice related to insurance rent for the period up to when the Council became aware of the breach on 18 October 2019. Accepting payment of that invoice was held to be an indication that it would accept only part of the sum and therefore the Council did not know that it was accepting rent that accrued due after the date of the breach.
To summarise, this decision tells us that a landlord will have waived its right to forfeit the lease for a tenant’s breach where:-
- there is a breach of the lease by the tenant (which is unknown to the landlord);
- the rent becomes due;
- the landlord learns of the breach, and;
- the landlord demands payment of rent.