Relief all round

A restaurant operator has obtained relief from forfeiture in the High Court in respect of its option for a new lease.  As a result of the relief, the option was reinstated.

Hush Brasseries Limited (“Hush”) operated its restaurant from a Mayfair property under a lease. It also had an option agreement enabling it to require the landlord to grant a new lease, although the landlord could terminate the option if forfeiture events under the lease arose. Arrears of rent which accrued during the pandemic constituted a forfeiture event and the landlord terminated the option agreement, leaving the lease in place. Hush applied for relief from forfeiture, a remedy in a property context usually designed for tenants under leases.

There were two obstacles Hush needed to clear before the Court would consider whether to grant relief on the option:

1. That Hush had a proprietary interest in the property – This was satisfied: the Court clarified any proprietary interest in land would satisfy this point. It did not matter that Hush was not in a position to exercise the option at the time it was terminated.

2. That the termination provisions in the option secured performance of the lease covenants -This was satisfied: the option and lease went hand-in-hand and the termination provisions of the option had the same qualities as a forfeiture provision to a lease (which clearly do secure performance of lease covenants).

The Court therefore had discretion whether to grant relief. Relief will be given when it would be unconscionable for the terminating party to rely on its contractual rights. The Court considered this was the case. Key to that was the fact that the arrears had accrued during pandemic restrictions on trade and Hush had cleared the arrears (through payment and a settlement agreement) while the landlord retained the benefit of rent under the lease without being burdened by the option.

Relief from forfeiture is now an option for those with proprietary or possessory rights which have been terminated. The availability of relief from forfeiture has been extended to option agreements and possessory licences. Landlords cannot assume that separate agreements will prevent relief being sought by a tenant/occupier.

Those facing termination of rights should take prompt action to assess if relief is available. 

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