Forfeiture of a lease via peaceable 'key'-entry?
The High Court has granted a landlord summary judgment in relation to their claim for a declaration that their tenant's commercial lease was not forfeited by peaceable re-entry.
In NPS (40GP) Ltd v Liberty Commodities  the tenant (Liberty), a metal trading company, had entered into a lease with the landlord (NPS) of exclusive premises in Belgravia. Liberty had been using the property as its London headquarters but when the rent free period ended Liberty fell behind with instalments of the £3.1million annual rent.
On 8 April 2022, having given advance warning to its tenants, NPS upgraded the main entry system to the building (but not to individual tenants' demises) and made clear that new key cards would be handed out to tenants on request.
Liberty had already confirmed to the landlord by this stage that it had moved out of the building and was pushing for a lease surrender.
In an attempt to escape its lease obligations, Liberty then sought to argue that NPS had forfeited the lease on 8 April by changing the building entry system. This was rejected by the judge on the basis that:
- On a proper construction of the grace period in the forfeiture clause in the lease, forfeiture on 8 April would have been premature and unlawful;
- NPS had chased payment of rent after it fell due and had waived the right to forfeit;
- NPS' actions did not amount to an unequivocal act of re-taking possession because (i) Liberty continued to have access to its own demise, (ii) there was no evidence that any employee of Liberty requested a ground floor key card, and (iii) any forfeiture on this basis would have led to all the leases in the building being forfeited, which they were not.
- Subsequent correspondence requesting a surrender on 11 April revealed that neither party believed at that point that the lease had come to an end.
A final argument that the change in entry system amounted to a repudiatory breach of contract such that the lease was now at an end was also rejected.
This was an unusual case in that it was the tenant rather than the landlord arguing that forfeiture had occurred, but it is a useful reminder that a passive stance by a landlord (as here with the new ground floor key cards) is unlikely to constitute an unequivocal intention to bring a lease to an end.