Breach of Covenant: Whether the Tribunal can determine breach of lease where landlord has waived the breach (Bedford v Paragon Asra Housing Ltd – 2021)
In a case concerning a breach of a lease’s prohibition against subletting, can the Tribunal make a determination where there is evidence that the landlord waived the breach?
In Bedford v Paragon Asra Housing Ltd , the tenant was the leaseholder under a shared ownership lease held with Paragon Asra, the terms of which prevented the tenant from subletting. In 2010, the tenant contacted Paragon for permission to sublet the property for a year while he relocated abroad temporarily. He was granted permission on the basis that he returned to occupation at the end of 2011. The tenant did not return, and instead continued to sublet the property whilst making a significant profit.
Paragon were notified by the tenant’s mortgage lender of the subletting in 2018 when the tenant was in arrears of rent. Paragon commenced possession proceedings in November 2018, and subletting in early 2020 was further established. Paragon wished to forfeit the lease, and brought an application in May 2020. The company had demanded and received rent from the tenant in the period from August 2018 to May 2020.
The tenant applied for the forfeiture proceedings to be struck out on the basis that they served no purpose, Paragon having waived its right to forfeit the lease by accepting rent in the knowledge of subletting. This strike out application was dismissed by the First-tier Tribunal; Paragon was entitled to make an application for determination of breach of lease for more reasons than purely forfeiture, and further, the FTT did not have the jurisdiction to consider whether a waiver had been made. The FTT found a breach of lease between 2011 and September 2018, and the tenant appealed.
The Upper Tribunal found in favour of Paragon, and the tenant’s appeal was dismissed. Paragon was entitled to commence forfeiture proceedings, during which a defence of waiver could be raised by the tenant if desired.
The FTT was entitled to consider alternative remedies for the breach of covenant beyond forfeiture, for example an injunction or a claim for damages. Paragon may seek either remedy, in addition to or as an alternative to forfeiture, and a waiver of its right to forfeit would not provide an adequate defence to either. However Paragon sought to remedy the breach, it must first determine that a breach had occurred, such determination to be made by the FTT if Paragon wished to forfeit the lease.
The tenant’s point regarding jurisdiction became immaterial given that the ‘abuse of process’ claim had been dismissed, and the UT did not need to make further determination on the waiver should it be possible to do so. The relevant facts were not established sufficiently in evidence to make any finding.
Advice and action for landlords
This decision is useful in its commentary that an application by a landlord for a determination of breach does not by default become a landlord’s intention to forfeit, and the landlord does not need to express intention to forfeit when making its application for determination.
The judgment supports the view that the Tribunal does have jurisdiction to determine whether, where a breach is found, any waiver has been made.
The Upper Tribunal found in favour of Paragon, and the tenant’s appeal was dismissed. Paragon was entitled to commence forfeiture proceedings, during which a defence of waiver could be raised by the tenant.