Proprietary Interests: Analysing Hush Brasseries & whether a call option constituted an equitable interest in land

Following the High Court’s decision in Hush Brasseries Ltd v RLUKREF Nominees (UK) One Ltd and another [2022], this report considers whether a call option constitutes a proprietary interest such that the court may grant relief from forfeiture.

Read our earlier report on the High Court’s decision

The background

Hush Brasseries Ltd v RLUKREF Nominees (UK) One Ltd and another [2022] concerned premises in Mayfair, London of which the restauranteur claimant was tenant under a 25-year lease completed in 1999.

A call option was granted by the original landlord to the tenant in March 2011 which was protected by a unilateral notice registered against the freehold title for the property. The option granted the claimant the right to call for the grant of a new lease of the premises on materially the same terms.

The landlord terminated the option on the grounds of non-payment of rent but did not forfeit the lease. The tenant settled the arrears and sought relief from forfeiture, arguing that termination of the option operated as forfeiture of the lease.

Did the call option create an equitable interest in land?

The decision

During the High Court hearing, the court ascertained whether the option constituted adequate proprietary interest in order to satisfy the first pre-condition to the grant of relief from forfeiture.

The court found that, prior to service of the landlord’s notice, and because the option could be terminated if forfeiture was exercised, the court concluded that the original parties had envisaged the lease and the option working in tandem, evidencing proprietary interest by way of the call option.

Performance of the tenant’s covenants was intentionally secured by the lease’s forfeiture provision, therefore satisfying the second pre-condition for relief from forfeiture. In its judgment, the court found that a termination provision mirrored a lease’s forfeiture clause such that it formed part of the lease’s security for performance of covenants.

The two pre-conditions for grant of relief from forfeiture were found to have been met and, finding that the landlord could not therefore retain the benefit of termination of the call option, the High Court granted relief to the tenant.

Advice and action for landlords

Building on our earlier case report, this decision is useful for landlords and the wider industry as guidance in how the courts will treat a call option. Here, the High Court found that an equitable interest in land was created by the option, such that relief from forfeiture could be granted.