Mohammed Majeed Faiz Shakeela Faiz SASSF Ltd v Burnley Borough Council

A landlord waives forfeiture only where, with knowledge of the facts giving rise to the right, it unequivocally recognises the continuing lease. Knowledge that a company occupies premises does not necessarily amount to knowledge that it occupies under a sublease. The court must identify the transaction constituting the breach and the landlord’s knowledge of it.

Acceptance of rent does not waive forfeiture where the liability for that rent accrued before the landlord acquired knowledge of the breach. A revised demand may be construed objectively as a recalculation of an existing liability rather than a fresh demand recognising the lease.

The claimants sought declarations concerning a café premises held under a lease from the defendant local authority. The claimants had granted a sublease to the third claimant, SASSF Ltd, contrary to the lease’s alienation covenants.

The Council learned in January 2018 that SASSF occupied the premises, but received notice of the sublease only on 18 October 2019. It served notices under Law of Property Act 1925, section 146, and forfeited by peaceable re-entry on 22 November 2019. The central issue was whether rent demands and acceptance before or after notice of the sublease waived forfeiture.

1. Waiver and knowledge. A landlord waives forfeiture where, with full knowledge of the facts giving rise to the right, it acts in a manner consistent only with continuation of the lease. The act must unequivocally recognise the lease and must be communicated to the tenant: Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850; Matthews v Smallwood [1910] 1 Ch 777; Cornillie v Saha and Bradford & Bingley Building Society (1996) 72 P&CR 147.
2. The Council knew by January 2018 that SASSF occupied the premises, but that knowledge did not establish that SASSF occupied under a sublease. Unlike Metropolitan Properties Co Ltd v Cordery (1980) 39 P&CR 10, the occupation initially arose under a licence, and the sublease was executed later. Acceptance of rent before notice of the sublease therefore did not waive forfeiture.
3. The court followed the ratio identified in Osibanjo v Seahive Investments Ltd [2008] EWCA Civ 1282, per Mummery LJ, that rent liability accruing before knowledge of the breach may be accepted without waiver. The alternative view expressed by Rix LJ was left open in that case.
4. The 4 November 2019 insurance-rent invoice was objectively a recalculation of liability arising under the earlier 26 September invoice. It was not a fresh demand recognising continuation of the lease. Its delivery and subsequent payment therefore did not waive forfeiture. The approach was supported by analogy with Mannai v Eagle Star [1997] AC 749.
5. The claim for a declaration that forfeiture had been waived was dismissed. The Council was entitled to a declaration that the lease and sublease determined on 22 November 2019. Consequential matters and costs were reserved for further submissions.