The first of three cases reported over the summer dealing with issues arising from the forfeiture of commercial leases. Bijlani v Medical Express (London) Limited (to which this article relates) concerned a breach of the user covenant under the lease. The second and third articles will deal with breach of obligation to pay rent, and points relating the waiver of the right to forfeit respectively.
Relevant facts
The background was as follows:
- The tenant held a lease of a room in a building on Harley Street, London, and was registered as a dentist with the General Dental Council (“GDC”).
- The lease provided that the room could be used for “consultations and legitimate surgical dental procedures by a dental practitioner who was qualified and registered in the UK with the GDC”.
- In June 2021, the tenant’s registration with the GDC was suspended for 12 months.
- Being unable to practice as a dentist, she continued to use the room, but for the provision of Botox treatments, an activity which does not require formal qualifications.
- On becoming aware, the landlord refused to accept rent (so as to avoid waiving the right to forfeit), and served the requisite notice pursuant to s146 Law of Property Act 1925 as a precursor to forfeiting the lease.
Judgment
Cosmetic consultation treatment did not constitute “legitimate surgical dental procedures” and the tenant was, during the period of her suspension, not a “dental practitioner who was qualified and registered in the UK with the GDC”. The root (canal?) of the problem was that, whilst suspended from the GDC, the user covenant prevented the tenant from using the room at all.
The court noted that the building was located on a street known for medical excellence, the landlord itself used the building for healthcare and another dentist operated from the basement of the building. It was found that the purpose of the user clause was, in part, to protect the reputation of the premises, which is something that the landlord’s other tenant of the building could expect.
Having confirmed the nature of the breach and that the landlord had validly exercised its right to forfeit, the court considered the tenant’s application for relief from forfeiture. The court found that there had been a genuine dispute as to the terms of the lease, such that the tenant’s breach was not as serious as it might otherwise have been. Moreover, there was no evidence that the landlord’s business or reputation had suffered because of the tenant’s use of the room for non-dental matters for the period during which she was suspended.
Accordingly, the tenant was granted relief from forfeiture on condition that she continued to pay rent and did not use the room whilst suspended from the GDC.
The Birketts view
The judgment in Bijlani, though unsurprising, serves to highlight the courts’ approach to interpretation of covenants – taking into account specific peculiarities of the letting (in this case, the Harley Street location) in establishing that the real purpose of the covenant in question was maintenance of the highest standards for the benefit of the landlord’s own business within the building, and that of its other tenant.
That said, it is hard to see how the same facts would not have led to a finding of breach even if the premises had been located in any local high street, as opposed to Harley Street.
As to relief from forfeiture, the judgment underlines the right to forfeit being security for performance of the covenant and so, provided the landlord could be put in the same position as before the breach occurred, relief should be granted.
The tenant’s genuine (though incorrect) belief that she was not breaching her lease stood in her favour on this point. The court might have been more willing to find that she would breach again, and refuse relief, if the finding had been of a deliberate decision to commit a breach.
Finally, the landlord’s service of a S.146 Notice, and its decision not to accept rent during the life of that notice, will be contrasted with approaches taken and points raised in the articles two and three of this series.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at July 2024.