Jurisdiction(s):
United Kingdom

Lease forfeiture costs clauses (England and Wales): Court of Appeal narrows 'incidental to' section 146; FTT costs not recoverable after transfer - Mayor and Burgesses of Tower Hamlets v Khan

Published on: 27 June 2022

Published by a LexisNexis Property Disputes expert

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Article summary

Mayor and Burgesses of the Tower Hamlets London Borough Council v Khan [2022] EWCA Civ 831 What are the practical implications of this case?

Lease agreements often include provisions enabling landlords to reclaim legal costs incurred ‘in contemplation of’ or ‘incidental to’ forfeiture proceedings. Attempts to recover rent and service charge arrears are frequently brought in forums where costs are generally not recoverable, such as the FTT and the County Court Small Claims Track. Landlords therefore lean on these provisions to assert that costs are contractually recoverable because proceedings to recover rent/service charge arrears were issued ‘in contemplation of’ or ‘incidental to’ prospective forfeiture proceedings. The Court of Appeal’s decision curtails the range of what will be treated as ‘incidental to the preparation and service’ of a section 146 notice, yet gives no guidance on what costs are incurred ‘in contemplation of’ forfeiture proceedings. It is noteworthy that the Court of Appeal concluded there was no inconsistency between Contractreal Ltd v Davies [2001] EWCA Civ 928 and 69 Marina, St Leonards-on-Sea v Oram [2011] EWCA Civ 1258, as the operative clauses in each ‘differed significantly’. The wording...

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