Cases involving the termination of the lease (in legal terms known as forfeiture) are never in short supply, even though a landlord’s right to change locks in the event of default by the tenant has long been enshrined in English law.
Every year seems to bring a new forfeiture case and a new point for the court to consider. This year, we have had an interesting forfeiture case involving the Empire Cinema in Leicester Square, London. The court was asked to look at whether or not the landlord’s re-entry to the cinema premises was unlawful at the time of re-entry.
The facts
Empire was the tenant of cinema premises under a 99-year lease, which expired contractually in November 2036. In 2020, at the start of the COVID pandemic, the rent was £5000 a year plus an annual insurance rent. As a result of the pandemic, the premises were closed from 21 March 2020 to 18 July 2021. The tenant did not pay their rent for that period nor the insurance rent. The landlord relied on that failure to justify their right to change the locks in May 2023.
The tenant’s defence was that they were able to claim the benefit of the statutory moratorium, which the government brought in to protect commercial tenants during the pandemic and the statutory arbitration procedure, which was introduced after the pandemic had ended, within which the tenant proposed that it should pay just half of the rent during the closure period with the other half being paid in instalments over two years.
The arbitrator rejected that attempt to reduce the rent and made a determination that all of the rent due for that period ought to be paid. Once the arbitration process had been concluded, the landlords changed the locks and regained possession of the property, albeit during a period when the time for appealing the arbitration decision was still running. The tenant, therefore, argued that the moratorium period was still running and that the landlord had no right to change the locks at that time, and if that was correct, that meant that the lock change was actually unlawful.
The landlords clearly had a commercial agenda for changing their locks because the landlords re-entered the property with the bailiffs via a fire door early on the morning of 4 May 2023, and by noon, they had granted licences to occupy to third parties shortly and afterwards, the third party was granted a new lease.
The new occupiers then carried out fit-out work at the premises to use them as a foreign exchange facility and a vape shop. This was during the weekend of the coronation of King Charles III, and clearly, the third party was keen to be in and trading during that weekend in order to maximise trade.
During the afternoon of 4 May 2023, the tenant paid the disputed arrears and immediately made an application for an injunction without notice to be re-admitted to the premises. The High Court granted that injunction, but it was discharged and replaced with a more limited injunction later on.
The case was then transferred to the County Court, where initially, the judge was asked to hear a summary judgment application by the tenant for a declaration that the forfeiture was unlawful.
The judge determined that the landlord had no right to change the locks, and the landlords appealed that decision. In the County Court decision, the judge was persuaded that on a true construction of the relevant coronavirus legislation, a moratorium was still in force at the date that the locks were changed. He did not consider that the doctrine of illegality, which the landlord sought to rely on, had any applicability to the facts of the case.
The judge also rejected arguments based on estoppel, waiver, and abandonment, which the landlords relied on to try to argue that the tenant had ended the appeal period under the arbitration proceedings. It was these points that the landlords challenged on appeal. However, the Appeal Court agreed with all of the original judge’s findings and the tenant was entitled to relief from forfeiture.
In reality, however, given that the landlord had already put in a new occupier and signed them up to a new lease, that presents a complex scenario where Empire Cinemas potentially cannot actually occupy the premises themselves but instead become a landlord to the newly installed tenant.
