The High Court has recently handed down judgment in The Tropical Zoo Ltd v The Mayor and Burgesses of the London Borough of Hounslow [2024] EWHC 1240 (Ch), which discussed how the inclusion in the lease of the ability for a landlord to serve a notice for breach can enable forfeiture, even after the right to forfeit for the main breach itself has been waived.
The Tropical Zoo case
The details and background of the case are complex. In summary, The Tropical Zoo Ltd (Tropical Zoo) took a 125-year lease of a site near Heathrow Airport in 2012 with the intention of developing a zoo on it. The lease imposed a covenant on the Tropical Zoo to build the zoo building within two years after completion of the lease. It also included in it covenant that the Tropical Zoo must remedy any breach of covenant notified to it in writing by the landlord, the London Borough of Hounslow (LBH), within two months after service of the notice. There was then a separate covenant stipulating that if the Tropical Zoo did not comply with that notice, it must allow LBH to enter and carry out the works at the Tropical Zoo’s cost.
The Tropical Zoo never managed to obtain the requisite funding for the c. £2-3m build cost of the zoo building. It failed to begin construction of the zoo building within the two years after the start of the lease in 2012, nor has it started it to date.
In 2020, LBH served the two-month notice on the Tropical Zoo in respect of the breach of the covenant to construct the zoo building within two years from the start of the lease. The Tropical Zoo failed to comply with the two-month notice, and so LBH served a pre-forfeiture notice (known as a section 146 notice) requiring the Tropical Zoo to remedy the breach of non-compliance with the two-month notice, within a reasonable period. Rent was being paid and accepted up to 2021. Open discussions were ongoing until proceedings were issued about when and how the Tropical Zoo would comply with its covenant, and about various alternative schemes it planned to use the site for. Eventually, discussions broke down and the Tropical Zoo issued a claim seeking declarations that (among other things) it was not in breach or that LBH had waived the right to forfeit.
The waiver point
On the waiver point, Mrs Justice Brown, determined, without difficulty, that:
- LBH had waived its right to forfeit in respect of the main breach that the Tropical Zoo failed to construct the zoo within two years after the start of the lease
BUT
- Despite that, LBH was still entitled to serve the two-month notice on the Tropical Zoo, and a failure by the Tropical Zoo to comply with that notice gave rise to a new breach, for which LBH could continue the next steps of the forfeiture process.
LBH’s section 146 notice (based on the Tropical Zoo’s failure to comply with the two-month notice) was therefore effective. The Tropical Zoo failed to comply with the section 146 notice, as it did not construct the zoo building within a reasonable period following service of the section 146 notice (said to be two years, taken from the original intention of the lease). Mrs Justice Brown decided that LBH was entitled to forfeit the lease on that basis.
What does this mean in practice?
The significance of this lies in the ‘two-month notice clause’ (which need not be limited in time to ‘two months’ at all, that was just the clause in this case). The clause enables notice to be given for any breach of the tenant covenants, even if the landlord has already waived the right to forfeit for that breach – hence, it enables the resurrection or re-birth of an otherwise ‘dead’ right to forfeit. The landlord must then ensure that they do not waive the right to forfeit in respect of any non-compliance with the two-month notice. Such a provision in the lease, therefore, affords the landlord a second bite at the cherry, and it is plain to see how useful it could be for landlords to fall back on.
While this is not new law, as it derives from a modified kind of notice known as a Jervis v Harris notice, it is an alternative application of an older principle that would seem to offer significant benefits for landlords.
It is worth noting that the Tropical Zoo has been granted leave to appeal in the Court of Appeal, so we will have to stay tuned to find out if this point receives any further clarification at that stage.
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