Illegal or Immoral use of Property

Many of our clients are Landlords with commercial premises. I am sometimes asked what they should do if they suspect that their tenant is using their premises for an illegal or immoral purpose?

In a lease you will usually find provision for a Landlord to re-enter those premises and to forfeit the lease for breach of the various covenants that the tenant has agreed to. Usually there is a covenant prohibiting use for illegal or immoral purposes. This is in addition to the clause that deals with the main use to which the premises can be put.

As long as the Landlord follows the correct formalities, forfeiture would normally be appropriate. In most circumstances a Landlord has to serve notice under Section 146 of the Law of Property Act 1925 before it actually re-enters and forfeits. This has to set out the nature of the breach and also advise as to whether it can be remedied. There would be a request that the tenant does remedy the breach. It would also require that tenant to pay compensation.

It is important that the Landlord complies with these requirements. If he does not then the forfeiture would be invalid. The whole point of the notice is to give the tenant an opportunity to consider the breach before any action is brought against it and the Landlord has to think carefully about what time period they should allow for this to be done.

Before he does anything the Landlord should have put some clear evidence together. He cannot just suspect that there is a breach. The Landlord has to have reasonable grounds for suspecting a breach of the covenants in the lease. The burden of proof is on him to establish that the right of forfeiture has arisen.

If the tenant is in breach of its use of covenants under the lease then this is capable of remedy. However, if the tenant is in breach of the illegal or immoral purpose covenants then the tenant is not able to undo the breach. The problem is that there will be stigma which attaches to the illegal or immoral use and obvious harm done although the Court does have to look at all the facts of the case. The Court tends to take a fairly traditional view of what immoral use actually is.

If the Landlord serves its notice and is then found to have wrongly suggested that the use of the property was illegal or immoral, then the tenant can obtain relief from forfeiture. In all cases however consideration will be given by the Court to a wide range of factors for example, the long term effect on the Landlord if relief from forfeiture is given. The Court will however also look at potential hardship to the tenant if relief from forfeiture is refused.

Over the years the Courts have taken a traditional and strict line on cases involving illegal or immoral use and the trend has been to refuse relief from forfeiture even where it would be difficult to suggest that there has been some lasting stigma. Perhaps things are changing? In Patel -v- K & J Restaurants Limited, a 2010 case, the Courts found that even though the Section 146 Notice was valid the tenant was granted relief from forfeiture on the basis that the property was in Tottenham Court Road and because of this location no long term stigma had attached to the building.

Perhaps the view of the Courts is changing and looking more widely at the expectations and culture of a more modern society when determining what is an illegal or immoral use of a property?

To discuss the issues raised in the is article or any issue generally affecting property call Richard Willis on 01908 689316 or contact him by email at rwillis@geoffreyleaver.com