Can a tenant forfeit their own lease?

In the unusual case of NPS (40GP) Limited v Liberty Commodities Limited [2023] EWHC 2137 (Ch), a landlord had to dispute a claim by their tenant that their lease had been forfeited, after their key card access to the building had been revoked following routine maintenance.

The lease between the parties was for a term of 10 years, with the annual rent of £3.1 million to be payable by equal quarterly payments. The tenant was in financial difficulty and so began negotiations for a surrender of its lease. Although an agreement was not reached, the tenant failed to pay the rent due on 25 March 2022.

On 8 April 2022 the landlord carried out routine maintenance to the building, which involved deactivating existing keycards and letting tenants know that new keycards were available on demand, however, new cards were not requested and therefore not issued to the tenant. The tenant vacated the premises and later creatively alleged that the deactivation of the keycards had amounted to a forfeiture of their lease. A forfeiture of the lease on 8 April 2022 would mean that all obligations to pay the rents due would have ended on that date. By the time the landlord’s claim was made, the tenant’s arrears were substantial and continuing to accrue.

In the legal proceedings the landlord’s position was that the lease was continuing and that rents were still due under the lease. The tenant asserted that the lease specified that if the basic rent remained unpaid 14 days after its due date, the landlord could re-enter the premises, and that the key card maintenance was an act by the landlord to forfeit the lease.

It was held that the lease was ongoing and that, not only did the landlord not have the required grounds to forfeit (had it wanted to), but the landlord’s actions did not amount to re-possession: only access to the common parts of the building had been affected. The second floor of the building, operated by the tenant’s own access system, had remained in use by the tenant which further supported the landlord’s case. The tenant also did not state at any point whether any of its employees asked for keycards and were refused the same. Additionally, the tenant had continued to negotiate a surrender of the lease after vacating the premises, which went against the notion that the lease had already been forfeited by the landlord.

Although only a landlord can forfeit the lease, this case shows how a tenant can be inventive in trying to avoid its rental liabilities. It serves as a reminder to landlords to take care when managing their buildings and to not be passive in respect of allowing access to all tenants. Landlords should be proactive in ensuring that all tenants have access to the premises to avoid tenants using access issues as excuses for alleging that a forfeiture has taken place.