Central Estates (Belgravia) Ltd v Woolgar (No 2)

A landlord who, with knowledge of a tenant’s breach of covenant, demands and accepts rent accruing after the breach unequivocally elects to affirm the lease and waives the right to forfeit for that breach. The legal effect is objective. It does not depend on the landlord’s intention to reserve the right, or on the tenant’s understanding of that intention.

Where a managing agent has authority to manage the premises, its knowledge of the breach and its employee’s receipt of rent are attributed to the landlord. Internal failures to communicate instructions cannot prevent waiver.

The landlords sought possession of leasehold premises after the tenant’s conviction for keeping a brothel, alleging breach of a covenant against nuisance, annoyance and disturbance. After learning of the conviction, the landlords’ managing agents demanded and accepted a quarter’s rent.

Judge Stockdale held that there had been no waiver because the tenant knew that the landlords still intended to forfeit the lease. He nevertheless granted relief from forfeiture. The landlords appealed against relief and the tenant cross-appealed on waiver. The central issue was whether the demand and receipt of rent had waived the forfeiture.

1. Appeal dismissed; cross-appeal allowed. The demand for, and acceptance of, rent after knowledge of the breach waived the landlords’ right to forfeit. The action for possession therefore failed.

2. Lord Denning MR held that, where the issue is waiver of an existing forfeiture, an unequivocal act recognising the continuing lease is decisive. Intention is immaterial once rent is demanded and accepted with knowledge of the breach. A landlord cannot preserve a right of re-entry by an express reservation, nor by an uncommunicated intention.

3. Buckley and Cairns LJJ agreed. The agents had authority to manage the premises. Their knowledge was the landlords’ knowledge, and the clerk’s demand and receipt of rent was the landlords’ act. The landlord could not separate knowledge held within the agency from the act of receiving rent. Acceptance was an irrevocable election to affirm the lease.

4. The discussion of relief under section 146 of the Law of Property Act 1925 was unnecessary to the result. Lord Denning MR considered that relief was not subject to an absolute bar following immoral use, although it would rarely be granted. Buckley LJ would have exercised the discretion differently but would not disturb the judge’s decision. Cairns LJ found no appellate basis to interfere with it.

5. The formal order dismissed the landlords’ appeal with costs and allowed the tenant’s cross-appeal with costs.

• Court of Appeal The landlords’ appeal against relief from forfeiture was dismissed. The tenant’s cross-appeal on waiver was allowed.

• Westminster County Court Judge Stockdale held that acceptance of rent had not waived forfeiture, but granted the tenant relief from forfeiture on 10 November 1971.

• Earlier Court of Appeal proceedings The court had affirmed leave enabling the landlords to pursue forfeiture after the tenant’s purchase notice: Central Estates (Belgravia) Ltd v Woolgar [1972] 1 QB 48.