Guernsey leases – no relief from forfeiture 

Although there are many similarities between commercial property transactions in Guernsey and England there are also some key differences which need to be considered in the structuring of the transaction and the documentation – one of these is that there is no relief from forfeiture available through statute in Guernsey.

Leases in both Guernsey and England will give the landlord the right to forfeit in the event of non-payment of rent, breach of covenant or on insolvency. The difference in England is that the tenant may apply to court for relief against forfeiture for breach of covenant (other than non-payment of rent) under the Law of Property Act 1925 to have the forfeiture set aside and allow a tenant to return and re-occupy premises re-entered by a landlord.

It is at the court's discretion whether to grant relief against forfeiture, and the tenant needs to satisfy the court that it will remedy any breach of the tenancy agreement. There is no equivalent protection for tenants in Guernsey. 

It is for this reason that forfeiture provisions are usually negotiated into Guernsey leases. These provisions will specify that the lease may only be forfeited for:

• Non-payment of rent, where the non-payment is not due to a banking error, which is immediately rectified by the tenant; or
• Breach of another covenant by the tenant, where a period of time is given for the tenant to rectify the breach and such rectification does then not take place.

A recent case in Guernsey, McAulay (Market Buildings) Limited v Barnabe Limited, resulted in an order for eviction being granted against a sub-tenant of a coffee shop due to its failure to keep the property in repair, thereby breaching the terms of the sub-lease.

Local media reported that the sub-tenant had been notified of the repairs that were required, which included broken pipes, fallen brick work and issues with the roof, on 4 July 2022 and an eviction notice was subsequently served by the sheriff on 14 November 2022 after those repairs had not been undertaken.

The sub-tenant had requested a stay in the eviction until May 2024, but the court ordered that it should be required to leave the premises at the end of September in view of the time which had passed since the repairs had been notified to it.

At a time when the economic climate is likely to see an increase in dilapidations disputes between landlords and tenants this case presents a timely reminder to both sides to look carefully at the terms of the lease to ensure compliance with their obligations.