Lease Forfeiture in Tropical Zoo Ltd v Hounslow Case

In March 2012, the tenant, Tropical Zoo Limited (“TZL”) was granted a 125-year lease by their landlord London Borough of Hounslow (“LBH”) of around 25 acres of green-belt land near Heathrow Airport, to deliver a visitor attraction bringing education, conservation and leisure together. 

The lease was generous, allowing TZL to enjoy 2 years of a rent free period, followed by turnover based rent, however it did feature an unusually bespoke covenant: “to remedy any breach of a Tenant Covenant Notified by the Landlord to the Tenant as soon as possible and in any event within two months after service of the Notice”. 

Although TZL established an urban farm which housed animals, birds, reptiles, fish and insects, it failed to complete the construction of the zoo by the agreed long stop date.

In fact, no meaningful progress was made and even by late 2020, the situation remained unchanged.

The landlord did not forfeit the lease following the failure to construct the zoo, and continued to accept and demand rent. By November 2020, though, the landlord decided to take action and serve notice on TZL, requiring the breach of the Tenant Covenant to be remedied within 2 months.

Despite this, TZL did not remedy the breach and therefore a further notice was served on them in February 2021 under s146 of the Law of Property Act 1925 to forfeit the lease. Following service of this section 146 notice, LBH requested their agent to cease demanding or accepting rent payments. However, despite this instruction, rent payments were still accepted and not immediately returned.

It is important to note that when a lease covenant is breached, the legal consequences often turn on whether the breach is ‘once-and-for-all’ (such as a failure to pay rent), or rather a ‘continuing’ breach (such as a failure to repair the property).

In the case of a once-and-for-all breach, the landlord must act promptly to enforce their rights, as any delay may be seen as a waiver of the breach. In contrast, a continuing breach is treated as a fresh breach each day it persists, which gives the landlord greater flexibility to take enforcement action at a later time, despite them seemingly waiving their rights.

Standard clauses typically grant landlords the right to forfeit the lease where there is a once-and-for-all breach. In this case however, the clauses were not standardised and TZL’s breach was rather a continuing breach, meaning a fresh right to forfeit arose each day.

For landlords, this case serves as a stark reminder of the importance of carefully drafted enforcement provisions.

Here, not only did the TZL fail to build the zoo, they committed a further breach by failing to comply with the bespoke covenant requiring the breach to be remedied within 2 months. This essentially gave the landlord another bite of the cherry as it then constituted a new breach.

Landlords should also be wary of the risks to waiving the right to forfeiture – especially as it was accepted in this case that an agent is capable of waiving forfeiture by accepting rent, even if instructed not to do so, and even where the acceptance is accidental.

On the contrary, for tenants, obviously such non-standard clauses should be avoided wherever possible.  

The case also emphasises that development obligations will be taken seriously by the courts, which can expose tenants to the risk of forfeiture years down the line if not complied with.

Finally, the case reminds us that relief from forfeiture will require the party to demonstrate to the court that they can remedy the breach and fulfil their obligations. Here, TZL clearly had no intention to build the zoo, as it did not have the funds and therefore could not show credible steps towards the performance.