The Court of Appeal has ruled on whether demand and acceptance of rent, whilst a landlord has knowledge of a breach, amounted to a waiver of the right to forfeit if the rent accrued due before the landlord had knowledge of the breach.
The landlord, Burnley Borough Council, granted a lease to the tenants which contained a clause that insurance rent was payable within 7 days of demand. However, without the landlord's knowledge the tenants had granted a sub-lease which amounted to a breach of the lease.
The landlord demanded the insurance rent which was payable within 7 days, however after demanding this, the landlord became aware that the tenants had granted the sub-lease. The landlord served a Section 146 notice and sent a second invoice for payment of the insurance rent, calculated only up to the date upon which the Council became aware of the breach. The tenants paid the invoice, following which the landlord purported to forfeit the lease by peaceable re- entry. The tenants argued that by accepting the insurance rent the landlord had waived its right to forfeit the lease.
The Court held that the first demand for the insurance rent could not have amounted to a waiver, as the tenants had failed to prove that the breach of the lease occurred before the insurance rent was due. In addition, the landlord did not know of the breach at the time the insurance rent fell due. The Court said that, "It does not matter whether the rent accrued due before or after the date of the landlord's knowledge; but whether it accrued due before or after the date of the breach of which the landlord (now) has knowledge".
The other issue the Court had to consider was whether the second invoice amounted to a fresh demand for rent as the landlord had knowledge of the breach. The Court held that it did not, as payment was due on the day the invoice was sent and the second invoice must have superseded the first. Therefore, the second invoice did not amount to a fresh demand for rent and there was no waiver of forfeiture.
The case demonstrates that the acceptance and demand for payment, when rent has already been accrued, will not amount to a waiver of the right to forfeit the lease if the landlord does not have knowledge of a breach.
