In Kwok Hon Shing v Happy Team (China) Ltd ([2015] HKEC 2038, LT) L granted T a four year lease of a unit in an industrial building. There were sub-lettings of part for residential purposes in breach of a covenant not to use the property for residential purposes. These breaches continued even after L’s complaint letter of 12 November 2014. L began forfeiture proceedings in February 2015. The breaches of covenant continued at least until 14 February 2015 but the unlawful sub-tenancies were subsequently terminated. L continued to accept rent until April 2015.
The lease contained a clause to the effect that acceptance of rent would not constitute a waiver of any breach by T. This clause had no effect in this case (if it ever has any effect at all); it could not alter the legal implications of acceptance of rent with knowledge of the breach ([33] – [35]).
In the case of a continuing breach of the user covenant, acceptance of rent only waived the breach up to the date of acceptance of rent. Subsequent breaches were only waived to the extent that L knew at the date of acceptance of rent that they would continue ([42]). The application to forfeit the lease was an unequivocal election to determine the lease and acceptance of rent after that could not amount to a waiver ([47]). L had not waived the breach and was entitled to forfeit. The breaches had, however, been rectified and T was granted relief from forfeiture under section 58 of the Conveyancing and Property Ordinance.
Michael Lower
