The claim related to a mixed-use building subject to a number of different leases. Derwent had granted a headlease of the entire building to Signature Living. Signature Living developed certain floors for residential use and subsequently granted long residential leases. Pursuant to the headlease, Signature Living had the responsibility for insuring and repairing the building.

Derwent subsequently took steps to forfeit Signature Living's lease on the grounds of non-payment of rent. This led to all underleases, including the residential leases, automatically being terminated. A number of residential undertenants (and their mortgagees) sought relief from forfeiture under s146(4) of the Law of Property Act 1925, seeking to effectively put their leases back in place.

Derwent did not object to relief being granted in principle, but opposed the form of relief sought by the sub-tenants as it would have led to a new headlease being granted in respect of only part of the building. Had this been the case, obligations would have been imposed on Derwent which it had not been subject to in the previous structure. This would include repair and maintenance obligations for the building structure. In addition, in relation to the Building Safety Act 2022, it would have made Derwent the “accountable person” responsible for managing extensive fire and structural safety risks/duties and liabilities.

The apartment owners argued that relief should be upon the basis of a lease in in respect of the residential units only, with repairing and insuring obligations for the main structure and common parts falling upon Derwent. Derwent's position was that any relief to be granted to the apartment owners must be on the same terms as the headlease. The result of this would be that the whole building would be vested in the apartment owners, with full repairing and insuring obligations falling upon them.

At first instance, the Court found in favour of Derwent. The Judge found that the apartment holders should be entitled to relief, but only in the form of the grant of a new headlease that mirrored the previous headlease of the whole building (i.e. the original headlease to Signature Living). The effect of this would be that the apartment owners would take on all repairing obligations for the building as a whole. The apartment owners appealed to the High Court, but that appeal was dismissed.

The key takeaways from this decision were as follows:

• Discretion – the court has a wide discretion when granting relief from forfeiture, particularly in respect of the terms on which relief can be granted

• Landlord must not be placed in a worse position following relief – the decision reinforces the position that no application for relief should be granted if the terms of that relief put the landlord in a worse position than it was in before forfeiture took place

• Building Safety Act 2022 – this was a key factor in the decision. Prior to forfeiture, Signature Living was responsible for all relevant obligations pursuant to the Act. The burden of the "accountable person" was a major issue in this case and significantly influenced the court's decision. If relief had been granted on the terms sought by the sub-tenants, Derwent would have inherited the significant and burdensome responsibilities pursuant to the Act – which underlined the point that relief on these terms would have put Derwent in a significantly worse position.