R Square Properties Ltd v Reach Learning Ltd

A landlord’s right to forfeit a lease may be waived by an unequivocal demand for future rent made with knowledge of breaches. The landlord cannot reserve a right to forfeit while treating the lease as continuing.

Whether a breach of covenant is capable of remedy under section 146 of the Law of Property Act 1925 requires a practical, fact-sensitive inquiry. A landlord should not pre-judge remediability in the notice. A claim for damages for alterations may be premature where the lease requires reinstatement at the end of the term and no immediate loss to the reversion is pleaded.

The claimant landlord granted the defendant academy trust a five-year lease of premises used as a temporary secondary school. The claimant alleged breaches involving an application to vary planning permission, unauthorised alterations and increased insurance risk.

The claimant served a notice under section 146 of the Law of Property Act 1925 and issued forfeiture proceedings. The defendant applied to strike out the claim and for summary judgment, relying on invalidity of the notice, waiver and the inadequacy of the damages claim. The central issues were whether the notice was valid, whether the claimant had waived forfeiture by demanding rent, and whether the damages claim could proceed.

The defendant’s application succeeded and the claim was dismissed, including the claim for damages.

1. The court rejected the procedural objection based on Ministry of Defence v AB & Others [2010] EWCA Civ 1317. The claimant had been represented when the application was treated as one for summary judgment and had had ample time to serve evidence.
2. Remediability under section 146 required a practical inquiry. Following Wickland (Holdings) Ltd v Telchadder [2014] 1 WLR 4004, Akici v LR Butlin Ltd [2006] 1 WLR 201 and Savva v Hussein (1996) 73 P & CR 150, the court held that the alleged insurance-related breach was prima facie remediable by payment of any additional premium. The notice was therefore partially invalid because it did not require that breach to be remedied. The remediability of the alleged alterations was a factual issue unsuitable for summary determination.
3. Waiver arose where, with knowledge of the relevant facts, the landlord did an unequivocal act recognising the continued existence of the lease and communicated it to the tenant. The rent demand of 30 August 2016 was an unequivocal demand for future rent. The claimant knew of the planning application, the alterations and the increased pupil numbers. The demand therefore waived the relevant breaches. Negotiations concerning another unit did not make the demand conditional or preserve the right to forfeit. The court applied the principles discussed in Segal Securities Ltd v Thoseby [1962] 1 Q.B. 887, Expert Clothing Ltd v Hillgate [1986] Ch 340, Matthews v Smallwood [1910] 1 Ch 777 and Oak Property Co. Ltd v Chapman [1947] K.B. 886.
4. The waiver defence was complete in relation to forfeiture and possession. The damages claim was unparticularised and premature. The lease required restoration at the end of the term, and no immediate damage to the freehold reversion had been pleaded. The claimant’s successor could bring a later claim if the premises were not properly restored.