08 November, 2019
Forfeiture is where a land owner takes back possession from a tenant due to a breach. The court has the power to grant relief from forfeiture to a tenant of a lease. This case examines the ability of the Courts to grant relief where the occupier holds a licence, as opposed to a lease.
Manchester Ship Canal granted a license to Vauxhall to discharge surface water and treated effluent from its plant, into the canal, all for the bargain price of £50 a year indefinitely. In return, Vauxhall were to carry out significant infrastructure works to Manchester Ship Canal's land.
The license granted Manchester Ship Canal the right to terminate if the £50 a year went unpaid.
Vauxhall missed payments and Manchester Ship Canal forfeited. Vauxhall offered to repay the arrears, but Manchester Ship Canal refused. Attempts were made by Vauxhall Motors to pay the arrears, which were declined. Manchester Ship Canal offered a new licence at a much higher yearly payment.
Vauxhall Motors issued proceedings seeking relief from forfeiture. Manchester Ship Canal defended the claim. Relief was granted by the first court, on the condition that Vauxhall Motors pay the arrears together with costs.
Manchester Ship Canal appealed the decision to the High Court which upheld the decision, as did the Court of Appeal.
In law, a lease grants property rights, whereas a licence only grants right to occupy a property.
Manchester Ship Canal argued that relief was only available for forfeiture of property rights (therefore leases) and not rights to occupy (licences).
The Supreme Court did not accept this argument. If the law can grant property rights over objects, why not over land?
The Court felt that, in this case, there was no good reason to draw a distinction between leases and licences.
One of the reasons for this is that Vauxhall's licence had similar properties to a lease, owing to the exclusive use they had of the canal and the works carried out.
On that basis, Vauxhall Motors were entitled to relief from forfeiture.
What does this mean for property transactions?
Although a licence is not a lease, depending on the rights granted, the occupier could have more rights than expected.
For more information contact Laura Hallett Lea in our Dispute Resolution department via email or phone on 0333 207 1141. Alternatively send any question through to Forbes Solicitors via our online Contact Form.