Forfeiture: Whether a lease can be forfeited whilst an arbitration appeal is still outstanding (Chana v CC Properties (Yorkshire) Ltd – 2021)

Where a landlord forfeits a lease whilst an arbitration appeal remains outstanding, can such forfeiture be deemed valid?

The background

In Chana v CC Properties (Yorkshire) Ltd [2021], the tenant made an application to an arbitrator for determination as to whether its payment of rent was suspended owing to water damage at the property. The arbitrator found that such suspension of rent was not justified, and the tenant appealed. During this time, the landlord forfeited the lease as a result of the tenant’s non-payment of rent.

The landlord’s forfeiture notice specified non-payment of rent by reference to a quarterly payment date. The tenant brought relief from forfeiture proceedings, arguing that rent had been suspended at the quarterly payment date specified in the notice. At first instance, the court found that the forfeiture of the lease was valid and lawful. The tenant appealed.

The decision

The High Court overruled the County Court decision, finding that its decision to declare the forfeiture valid resulted in the arbitration appeal being disregarded. The tenant still wished for the arbitration appeal to be dealt with, and the County Court had intervened with the arbitration proceedings against the principles of autonomy and non-intervention.

The High Court found that the County Court’s correct approach should have been to adjourn its final decision until resolution of the arbitration appeal. That said, the High Court found that the appeal did not stand a realistic prospect of success; the tenant was to make a renewed application for permission to appeal.

Advice and action

A useful decision where a number of proceedings are ongoing simultaneously, Chana confirms that a landlord is advised to wait for related proceedings to be concluded before forfeiting a lease, avoiding unnecessary costs and ensuring that as few grounds as possible exist to support a tenant’s application for relief from forfeiture. Arbitration proceedings must remain independent from the courts, and should be concluded before court proceedings are considered.