24
Jul
20
Articles, Property, Chancery & Commercial
Forfeiting a lease for “Permitting or suffering” and immoral use: Marchitelli v 15 Westgate Terrace Ltd [2020] UKUT 192 (LC)

Many flats held under long leases are not occupied by the headlessee but someone occupying under a sub-tenancy. This arrangement can give rise to difficulties enforcing the terms of the headlease that prohibit the headlessee from “permitting” or “suffering” certain conduct to occur in the flat.

Marchitelli v 15 Westgate Terrace Ltd [2020] UKUT 192 (LC) provides a good illustration of the problem.

Ms Marchitelli owned a 999 year headlease which included a restriction on the lessee in the following terms:

“Not to do or permit or suffer in or upon the Demised Premises or any part thereof any illegal or immoral act or any act or thing which may be or may become a nuisance or annoyance or cause damage to the Lessors or the tenants of the Lessor or the occupiers of any part of the Building.”

Ms Marchitelli’s landlord alleged that this and other covenants had been breached because her flat had been used as a brothel.

Under s.168(4) of the Commonhold and Leasehold Reform Act 2002 the landlord of a long lease of residential premises cannot serve a section 146 notice as a prelude to forfeiting a lease for breach of covenant unless the breach is either admitted or has been determined by the appropriate tribunal or court.

The landlord therefore applied to the First-tier Tribunal (“FTT”) for a determination that Ms Marchitelli had breached the lease. The FTT found from the circumstantial evidence that the flat had been used as brothel but did not make a finding about whether Ms Marchitelli had permitted or consented to this use.

Ms Marchitelli appealed to the Upper Tribunal on the ground that the FTT has failed to make any finding that she herself had permitted or suffered the flat to be used as a brothel. Her case in the FTT had been that she had been seriously ill, the flat had been managed by a third party who had sub-let the flat and that she had got rid of the troublesome occupier after complaints had been made.

Her appeal succeeded. In allowing the appeal the Upper Tribunal (“UT”) gave helpful guidance on what is required to show that a party has permitted and suffered a breach to occur.

  1. the word “permit” means either to give leave for something which without that leave could not legally be done, or to abstain from taking reasonable steps to prevent the act which it is within a person’s power to prevent;
  2. a tenant may be guilty of a breach of covenant consisting of permitting or suffering a prohibited use if the use has been permitted or suffered by the tenant’s agent acting within their authority
  3. in determining whether a tenant has omitted to take steps which it was reasonable to take, all of the facts and circumstances must be taken into account. The question is whether a reasonable person in the position of the tenant would have taken steps to prevent the prohibited use which the tenant failed to take.
  4. The expression “suffer” has been treated as having a synonymous meaning to “permit”

The UT accepted that there was evidence capable of supporting a conclusion that Ms Marchitelli or her agent had permitted or suffered the flat to be used as brothel but rejected the landlord’s argument that it could be inferred from FTT’s reasoning that it had found that Ms Marchitelli had permitted or suffered the breach.

Noting the connection between a FTT’s decision that there had been a breach of a lease and the s.146 notice that could be served following such a determination, the UT held that a FTT’s decision must have the “same degree of transparency” as is required of a s.146 notice i.e. the lessee should not have any reasonable doubt as to the particular breaches which are specified (see Akici v L R Butlin Ltd [2006] 1 WLR 201).

The case was therefore remitted to a new panel of the FTT to reconsider.

In reaching this decision the UT also made this point:

Unless the FTT makes specific findings of fact concerning the breach and the tenant’s part in it, the County Court will face an impossible task when it is required to determine whether to forfeit the lease or to grant relief against forfeiture. It is essential that the County Court is in a position, from the FTT’s decision, to assess the seriousness of the breach, the culpability of the appellant, and the appropriate response to an application for relief against forfeiture. If that degree of certainty is not achieved it may be necessary for the County Court to rehear the evidence which has already been presented to the FTT. That is not what section 168 contemplates and would render it pointless [para 52]

This is particularly important in a case of immoral use (i.e. use for prostitution) as the courts have drawn a distinction between cases where the tenant committed the breach or deliberately closed its eyes to the breach and cases where the tenant was unaware of the conduct. It is only in the latter case that the breach is remediable so that under s.146 a tenant is entitled to have time to remedy the breach (see Patel v K&J Restaurants Ltd [2010] EWCA Civ 1211) and has a far better prospect of being granted relief from forfeiture.

The observation of the UT may also feed into the ongoing debate as to the division of property jurisdiction between the FTT and the County Court (see e.g. the Report On Property Chamber Deployment Project For Civil Justice Council).

Written by or involving: Zachary Bredemear

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