The Harrison Drury Blog

Does relief from forfeiture apply to licences?

Male hand with keyA recent High Court ruling appears to have extended relief from forfeiture to property licences, not just property leases. Property litigation lawyer Laura Hallett Lea investigates the reasons behind this controversial decision and the implications for landlords and tenants.

The recent High Court ruling in the case of General Motors UK Ltd v Manchester Ship Canal Company Ltd [2016] EWCH 2960 has caused ripples within the property law community.

But before we go into detail about the case, we should perhaps start with the basics.

What is the difference between a licence and a lease?

A licence permits a licensee (a party with permission) to do something on the licensor’s (party who owns the land) property, whereas a lease provides for a transfer of proprietary rights over property for a fixed term and for a fixed sum.

What is forfeiture?

Forfeiture is where a landlord seeks to end a lease by re-entering a property, following a breach of a term of the lease (for example, non-payment of rent) where there is a right reserved to the landlord to do so. In such circumstances, a tenant can apply to the court to seek relief from forfeiture, i.e. for the court to set the forfeiture aside. The court’s powers are discretionary and it considers each case on its own merits.

This decision is therefore of particular relevance to licensors or landlords who may have inadvertently waived their right to forfeit by allowing the licensee or tenant to continue to exercise their rights under the licence or lease and entering into negotiations for a new licence or lease.

Facts of the case

General Motors UK Ltd (GM) had entered into a perpetual licence with the Manchester Ship Canal Company Ltd (MSCC) in 1962. Under the terms of the licence, GM was permitted to discharge surface water from their land into the adjoining Manchester Ship Canal, owned by MSCC. GM exercised this contractual right for an annual fee of £50.00. There was a clause in the licence which stated that the licence could be terminated for non-payment of the £50.00 fee. For some reason this went unpaid.

What does this mean?

This case is interesting because we often define the differences between a lease and a licence and then act accordingly – and only tenants under leases, as opposed to licences, have ever been granted relief.  Here, the court concluded that the agreement was a licence but despite this still ordered relief from forfeiture.

The concern therefore is that a landowner might grant a licence and still be giving the occupier rights of a tenant. It appears from the judgment though that this decision was fact specific and is very unlikely to apply to all licences.

Will there be an appeal?

MSCC is understood to have applied for permission to appeal the decision. We await the ultimate outcome of this case with baited breath.

For more information on the law surrounding relief from forfeiture, or any other landlord and tenant issues, contact Laura Hallett Lea on 01772 258321.

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