Termination of Tenancies for Tenant Default - Law Commission

including a termination order, that is appropriate and proportionate
in the circumstances; 31
(3) unless such an order has effect, the proceedings on the termination
claim will be stayed for three months from the day after the
specified day; 32
(4) the landlord may apply for the stay to be lifted on the ground that
the tenant did not complete the specified action before the end of
the specified day; 33
(5) if the court, on such an application, lifts the stay, it may make any
order under the scheme that is appropriate and proportionate in the
circumstances; 34 and
(6) if the court dismisses an application to lift the stay, or no such
application is made during the period of the stay, the proceedings
on the termination claim shall come to an end. 35
ORDERS FOR SALE
5.48 Under the current law, a completed forfeiture, where the court has not granted
relief, results in the termination of the tenancy. Where the tenancy has a high
capital value, typically a long residential tenancy or a commercial tenancy
granted for a long fixed term, the tenant stands to lose a significant asset with no
compensation. Any mortgagees or sub-tenants also stand to lose their potentially
valuable interests in the tenancy, as these interests automatically terminate along
with the forfeited tenancy. 36 Meanwhile, the demised premises revert to the
landlord far sooner than would have been the case had the tenancy run on for its
full contractual term. The landlord is free to deal with the premises as he or she
sees fit, typically by letting them to a new tenant or by selling the reversion,
unburdened by the forfeited long tenancy. The result is that the landlord may
receive a significant windfall at the expense of the tenant and derivative interest
holders. We consider this to be a defect in the current law.
The CP’s provisional proposals
5.49 The CP provisionally proposed that a court hearing a landlord’s termination claim
would be able to make an absolute termination order, a remedial order or no
order. 37 An absolute termination order would bring the tenancy and any interests
which derive from it to an end, with all the potential unfairness we have just
31 Draft Bill, cl 13(2).
32 Draft Bill, cl 13(3).
33 Draft Bill, cl 13(4).
34 Draft Bill, cl 13(4).
35 Draft Bill, cl 13(5).
36 Subject to such independent right as they may have to claim relief.
37 CP, para 12.6(2), (4) and (6). A number of additional orders could be made only on the
application of a member of the “derivative class”: CP, Part VII. These provisional proposals
and our final recommendations are dealt with in Part 6.
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