The case of General Motors UK Ltd v The Manchester Ship Canal Company Ltd concerned a licence agreement which allowed General Motors to discharge surface water into the canal for a modest annual fee of £50.
Forfeiture: the residential spanner in the works?
Forfeiting a lease of commercial premises can be as simple as changing the locks. But in the case of residential premises, a landlord has to tread with much greater care. Changing the locks is not an option. So says the Protection from Eviction Act 1977which requires a landlord to obtain a Court Order in the case of residential premises.
But what is the case where a single lease comprises both a commercial and a residential element? The typical scenario involves a lease of a shop with residential accommodation above it. If the tenant defaults, can you change the locks or not?
In the case of Patel –v- Pirabakaram, the tenant occupied a shop on the ground floor and a residential flat on the first floor. The premises were let on a single lease. The tenant fell into arrears of rent and the landlord changed the locks on the shop. The tenant refused to vacate the flat and the landlord therefore commenced possession proceedings seeking the eviction of the tenant.
The case ended up in the Court of Appeal and the Court ruled against the landlord. The Court found that because part of the property was let as a dwelling, the lease of the premises could only be forfeited by way of a Court Order. Changing the locks was unlawful and rendered the forfeiture ineffective. The landlord’s claim was therefore dismissed.
The message from this case is loud and clear. A residential element of a lease is always going to trump a commercial element when it comes to the protection of a tenant’s rights. If the demise includes a residential element, the Protection from Eviction 1977 is automatically going to be engaged and you need to tread with care.
Even if you are in doubt as to whether the residential part of the premises is occupied or not, proceed with caution and apply for a Court Order rather than changing the locks. Getting forfeiture wrong can lead to costly counterclaims and the perverse scenario of potentially having to compensate your defaulting tenant.