Relief against forfeiture

Whether relief requires an occupier to enjoy proprietary or possessory rights.

The background

In Manchester Ship Canal Company Ltd v Vauxhall Motors Ltd [2018], the respondent Vauxhall enjoyed rights granted in 1962 under licence by the appellant to discharge water and trade effluent into the Manchester Ship Canal, owned and maintained by the appellant.

A fee of £50 was payable annually for the exercise of the right. The October 2013 payment was missed and the licence forfeited by the appellant in March 2014. The respondent continued to exercise its rights during the negotiations for a new licence, and subsequently sought relief from forfeiture. At first instance, relief was granted; the Manchester Ship Canal Company appealed on a number of grounds, one of which stated that the judge had no jurisdiction to grant relief where the licence conferred no proprietary or possessory right.

The decision

The Court of Appeal dismissed the appeal. Although it agreed that relief from forfeiture applies to those cases where a proprietary or possessory interest exists, the Court also decided that in this case, the licence conferred a possessory interest by assessing the respondent’s factual possession and intention to possess the subject property.

The respondent was responsible for the maintenance and repair of the infrastructure at the property, and no provision was made for step-in rights should the respondent default. The Court of Appeal therefore held that the court did have the relevant jurisdiction to grant relief from forfeiture and it did not find any reason to interfere with the decision.

Advice and action for landlords

This case is a word of warning to landlords which may wish to enter into licence arrangements. Care must be taken in drafting to ensure that no proprietary or possessory rights are granted which may give a licensee the right to seek relief from forfeiture.

In particular, landlords should consider who will be responsible for the maintenance and repair of infrastructure and it is advisable that rights are reserved to intervene and assume responsibility where a licensee defaults. Further, it is recommended to allow for periodic increases in the licence fee and to include express drafting which sets out how and when re-entry may take place. If a landlord has a licence in place and knows or suspects a breach has occurred, take prompt legal advice to avoid any unnecessary delays in bringing proceedings.