Termination of Tenancies for Tenant Default - Law Commission

Consultation
6.17 Discussions with interested parties both before and after publication of the CP
have made it abundantly clear that a proliferation of qualifying derivative interests
would not be generally welcomed. A number of different reasons for this were
given.
6.18 The Council of Mortgage Lenders and the British Bankers’ Association, both
representing institutional lenders, were wary of any expansion of the class of
qualifying derivative interests which would lead to an increase in the number of
applicants for “relief”. First, they naturally wished to keep to a minimum the
number of interests that might compete with their security. Secondly, both
consultees queried what shape or form the court order would take where the
court is faced with a myriad of competing claims for relief and who would enforce
it. Finally, it was felt that court hearings would be longer and more costly where a
number of applicants sought to put forward their case for relief.
6.19 There was unanimity among consultees that sub-tenants and mortgagees, at
least where the sub-tenancy or mortgage had been lawfully granted, should be
entitled to claim relief. Beyond that, however, views were more varied. Many
consultees agreed with the Association of District Judges that this list should not
be extended any further but others argued for the inclusion of additional interests
in the qualifying class.
Sub-tenants
6.20 Under the current law, a sub-tenant or an under-tenant (that is, a sub-tenant of
the sub-tenant or a sub-tenant of theirs and so on) 10 may apply for relief from
forfeiture for non-payment of rent or any other breach of covenant. 11 Relief takes
the form of the grant by the court of a new tenancy of the premises demised
under the previous tenancy, on such terms as to rent and other covenants as the
court thinks fit. 12 Where the ground of forfeiture is a breach of covenant other
than non-payment of rent, a sub-tenant may also seek to have the forfeited
tenancy reinstated. 13
6.21 Where forfeiture is for non-payment of rent, a sub-tenant may seek relief during
the course of forfeiture proceedings or after the landlord has physically re-entered
(or even after an order for possession against the tenant has been made and
executed, subject to compliance with certain time limits). 14 The effect of relief
under these provisions is stated to be that the lessee “shall hold the land
10 Law of Property Act 1925, s 146(5).
11 Law of Property Act 1925, s 146(4).
12 Where the applicant is a sub-tenant, the new tenancy may not be longer than the
unexpired term of the sub-tenancy: Ewart v Fryer [1901] 1 Ch 499.
13 Under Law of Property Act 1925, s 146(2): see Escalus Properties Ltd v Robinson [1996]
QB 231. This may be advantageous because relief under s 146(2) operates to
retrospectively reinstate the proceedings tenancy from the date of re-entry, whereas s
146(4) prospectively creates a new tenancy from the date specified in the order.
14 Depending on whether the proceedings are in a county court or the High Court, this
application will be governed by the terms of the County Courts Act 1984, ss 138 and 139,
or the Supreme Court Act 1981, s 38: see the CP, Part II.
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