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Service of s.146 Notice

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Can a s.146 Notice be served before a right of re-entry has arisen?

The background

In Toms v Ruberry [2017], the leaseholder of a pub lease was engaged in a dispute with the freeholder. It was argued by the freeholder that the leaseholder had not complied with its repairing obligations under the lease, which allowed the freeholder to enter the premises and forfeit the lease in the event of the leaseholder’s default.

The lease also stated that the leaseholder had a 14-day period within which it could remedy any breaches following service of a ‘default notice’ from the freeholder. Where the leaseholder failed to remedy the breaches specified in the default notice, the freeholder could enter the premises and forfeit the lease.

The freeholder served a ‘default notice’ and a s.146 Notice of the landlord’s intention to forfeit. The leaseholder was given 7 weeks to remedy the breaches; after this period, the freeholder concluded that the breaches had not been satisfactorily remedied and brought a forfeiture claim.

The decision

This case centred around the date that the s.146 Notice was served, and the freeholder’s appeal was dismissed. It was held that the right of re-entry only arose if the breaches had not been remedied within 14 days of service of the ‘default notice’.

As the s.146 Notice was served at the same time as the default notice, it was not valid; even though a right of re-entry arose later, this didn’t validate the service of the s.146 Notice which must be served when a right of re-entry exists, and not on the basis of a possibility that it may exist in the future.

Advice and action for landlords

It may make sense to landlords wishing to terminate a lease to serve a s.146 Notice straight away following a breach. However, this case is a reminder to ensure that a right of re-entry exists at the time the s.146 Notice is served, and that there must be absolute certainty that such a right exists.

Where a leaseholder is given opportunity to remedy a breach, no right of re-entry exists, and the s.146 Notice cannot be served, until that opportunity has expired and the leaseholder has not remedied appropriately.

A s.146 Notice cannot be served until any opportunity that the leaseholder has to remedy its breaches has expired, and a right of re-entry has arisen.

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