The remedies available to LLs offer them considerable power to enforce Ts covenants and are significantly in excess of those available to Ts.
The remedies available to LLs offer them considerable power to enforce Ts covenants and are significantly not in excess of those available to Ts.
The LLs first step in dealing with a breach of covenant will normally to inform the T of the breach and ask for it to be remedied.
If the T does not, the LL will send a LETTER BEFORE ACTION (sometimes known as a seven-day letter) formally giving the T seven days in which to remedy the breach.
rent and other sums reserved as rent (service charge, insurance, etc). For these payments, the period in which the LL must issue proceedings is 6 years from the date the payment became due, unless the debt has been acknowledged by the T at a later date, in which case the 6 year period begins to run again from the date of the acknowledgement.
Distress is an ancient remedy which entitles the LL to enter the premises where rent is unpaid and take possession of the T’s goods to satisfy the amount of the outstanding rent
Distress is break and enetering, an ancient remedy which entitles the LL to enter the premises where rent is unpaid and take possession of the T’s goods to satisfy the amount of the outstanding rent: illegal now
The bailiff can remove goods found in the demised premises and impound them either on or off the premises. Most commonly the goods will be held on the premises, a procedure known as WALKING POSSESSION
It is a criminal offence for anyone other than the LL (or someone acting on his behalf) to remove the goods during the period specified in the notice of distress (a minimum of 5 days
In either case, the LL is entitled to sell the goods after the specified period as elapsed, unless during this time the T. has paid the outstanding rent.
In either case, the LL is not entitled to sell the goods after the specified period as elapsed, unless during this time the T. has paid the outstanding rent.
The T may be entitled to damages (double value) where the LL wrongfully distrains and sells the goods
Certain items are privileged against distress. These include tenant’s trade fixtures, loose money (but not money stored in a safe) and wild animals! Any item actually in use at the time cannot be distrained against.
Certain items are not privileged against distress. These include tenant’s trade fixtures, loose money (but not money stored in a safe) and wild animals! Any item actually in use at the time cannot be distrained against.
Ts need to be careful about taking action to avoid the bailiff removing goods. The LL may be entitled to up to treble the value of the goods where the T removes them with the intention of avoiding distraint (known as ‘rescue’),
Forfeiture – The right of a LL to retake physical possession of the premises and thus put an end to a lease following the Ts failure to remedy a breach of covenant. This right may be contained within the lease or the LL may have it by operation of law
Forfeiture – The LL does not have the right to retake physical possession of the premises and thus put an end to a lease following the Ts failure to remedy a breach of covenant. This right may be contained within the lease or the LL may have it by operation of law
Re-entry – A LLs right to reclaim title to a property where rent due has not been paid, or some other significant breach of the lessee’s covenants
In view of the rights to relief in equity, the LL cannot normally enforce a right of re-entry without recourse to the courts.
the LL has a right to forfeit the lease under the Law of Property Act 1925 as most leases contain provision allowing re-entry in the event of a breach of covenant
The right of the LL to forfeit the lease is not enforceable until he has served a notice under s146 of the Law of Property Act 1925 giving the T notice of the breach and a period in which to remedy it, except where the breach is non-payment of rent, in which case the Section 146 notice is not required.
Once the period has elapsed the LL can make a claim for possession either by bringing an action for possession in the courts, or by taking peaceable re-entry
Once the LL applies for or takes possession, the T or any subtenant can apply for relief from forfeiture.
relief from forfeiture
However, the T must show a willingness and ability to comply with their covenants and persistent material breaches will not normally be tolerated.
Where the breach is non-payment of rent, payment of all or a significant part of the arrears will often be a condition of the relief.
Where the breach is non-payment of rent, payment of all or a significant part of the arrears will not be a condition of the relief.
Where a subtenant is granted relief, they will normally have to take on the terms of the headlease (save for the term, which will be that of the sublease) and may have to pay the headlessee’s rent arrears even if they themselves are not in arrear.
There are some situations in which the LL loses the right to forfeit as follows:
waiver of breach - accept breach of covenant
waiver of breach - do not accept breach of covenant
The LL may not have complied with all technical requirements. E.g. where rent has not been formally demanded. This requirement is excluded in most modern leases, but where it is not and the LL omits to make a formal demand he may lose the right to forfeit.
The T can prevent the LL from peaceably taking possession by appointing security guards or other staff to stay on the premises and prevent re-entry. Re-entry is not legal where the LL meets such resistance and a court order will need to be obtained to secure possession.
The third remedy is an action for breach of contract. This is known as an action in damages as the LL will make a claim for damages to compensate him for the breach.
The damages usually comprise the loss directly associated with the breach together with costs and interest at a statutory rate.
In making the claim for damages the LL has to undertake the following steps:
s146 notice (for breach of the repairing covenant only). Where the breach is of a repairing obligation, the LL must serve a s146 notice specifying the breach, which will normally require a schedule of dilapidations.
T is entitled to a reasonable period in which to remedy the breach. The period will depend on the nature of the lack of repair, but except in the case of minor repairs will usually be several weeks.
A s146 notice is not required where damages are being claimed in respect of a breach other than lack of repair.
Proceedings. If the T fails to comply with the s146 notice or letter before action, the LL can serve proceedings. T will have a limited period in which to protect their interests and should consult a lawyer immediately.
Enforcement. If the LL is successful in obtaining judgment against the T in the County Court this will be recorded as a County Court Judgment and will affect the tenant’s credit status in the future. The LL still has to enforce the judgment, for which there are the following options:
Execution on goods: removal of the Ts goods to the value of the judgment, wherever the goods may be (i.e. not just at the demised premises as for distress). This is carried out by officers of the court.
Garnishee order: this compels payment of cash from a bank account, or other debtors.
Charging order: this charges a property owned by the T and payment of the debt must be made from the proceeds of any sale of the property (unless there are any prior charges).
Attachment of earnings order: this is an unusual method and compels an employer of the T to make deductions from their earnings and forward them to the LL towards satisfaction of the debt.
Winding up or bankruptcy proceedings.
Rent Deposit: LLs are often reluctant to use these as a first resort because of the difficulty in making the tenant replenish them.
Guarantee (bank, parent company, owner, AGA) the LL may pursue these parties in addition to or instead of proceeding against the T.
Where a former T has a liability under privity of contract (leases granted before 1st January 1996) the LL may choose to pursue these Ts.
If the T has granted a sublease the LL can serve a notice on the subtenant under the Law of Distress (Amendment) Act 1908 requiring payment by the subtenant of the sublease rent directly to the LL to satisfy the amount of the T’s arrears.
Where the breach is other than non-payment of rent, the LL may have further remedies available to him. It is common in modern leases for a LL to have an express right to enter onto the premises to remedy certain breaches, particularly to undertake repairs. The LL will normally be able to charge the costs involved in such action to the T.
In some cases the LL may be able to obtain an injunction to prevent T from doing something prohibited in the lease, e.g. undertaking alterations, committing a nuisance or to require T to do something to remedy the breach. LL may in some situations be able to obtain an order for specific performance obliging T to comply with a positive covenant.
The LL can apply to the court for a T company to be wound up without first obtaining judgment, if the amount of the debt is definite and is greater than £750. Service of a statutory demand is the first step in the process.