Guernsey Royal Court rules in favour of tea room tenant in rent dispute

This article features in the autumn 2024 issue of the Channel Islands Property Newsletter.

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In a recent case to make the headlines, the tenant of a Guernsey tea rooms has won a legal battle against the site's owners after the Royal Court rejected an application to evict them based on a late rent payment.

The landlord of the tea rooms, who has owned the site for over 40 years, argued that the tenant had "failed to pay rent since January 2024." The landlord argued that February's rent was eight days overdue and as such, sought to bring eviction proceedings against the tenant for failure to pay rent.

The lease in question is not on standard commercial terms and is in a short form, which does not include any express provisions relating to: (i) the right to terminate the lease in the event of breach or (ii) the giving of notice.

It was accepted by the Court that failure to pay rent in accordance with the terms of the lease is a repudiatory breach – one that goes to the very heart of the contract and allows the innocent party, in this case the landlord, to treat the contract as terminated, or forfeited, by the tenant. It would therefore be possible for a tenant to be evicted as a result of a single late payment.

It was noted that "Guernsey has not introduced any legislation which alleviates the harshness of this customary law rule" (unlike in England, where some form of relief from forfeiture has been in place for over 170 years) but "where an eviction order is made the Court has power, which is discretionary, to stay the eviction… up to the end of the term of the relevant lease or even during the whole of the tenant's lifetime".

The key facts of the case were that rent was paid late – after the date it was due under the lease but before the tenant received a notice from the landlord purporting to terminate the lease – so was the Landlord's notice still effective?

In short, the Court decided – no.

The Guernsey Court refused to be bound by the basic principles of English contract law "where the English law itself has made the issue… largely irrelevant by the introduction, by statute, of relief against forfeiture." It found that "where a lease contains no provision for termination, it cannot be terminated by reason of non-payment of rent after the rent has been paid up to date." The landlord's application for an eviction order was therefore dismissed.

It is also worth noting that the Court opined that, even if it had followed the basic principles of English contract law, the landlord's claim would have failed due to their Advocate setting out in correspondence that the landlord was only intending to terminate the lease if the rent payment had been made after receipt of the landlord's notice.

Finally, the judgment notes that the payment was not returned by the landlord until nearly a month after being received and that this exceeded the reasonable period within which they were otherwise obliged to return it.

We've put together the top three takeaways from this case that landlords should be aware of. 

• Make sure that your commercial lease is on full terms. Having to review a lengthy document might not be appealing in the short term, but those provisions are included for a reason!
• Consider the implications of giving notice if it is not required by the terms of the contract or statutory process – it might seem reasonable to put the other party on notice but you might risk weakening your position if it's not legally required.
• If you have received a payment which you do not wish to accept, ensure that this is communicated quickly and that efforts are made to return the money in a timely manner.