Impact of a Non-Reliant Side Letter When Seeking Relief Against Forfeiture, by Louise Wright, published in the Conveyancing and Property Law Journal – (Spring 2025) Vol. 30 (1), Thomson Reuters, Round Hall.

The article “Impact of a Non-Reliant Side Letter When Seeking Relief Against Forfeiture” was published in the Conveyancing and Property Law Journal – (Spring 2025) Vol. 30(1) Thomson Reuters, Round Hall. The article is available on www.westlaw.ie or alternatively in print via email TLRUKI.orders@thomsonreuters.com

The article discusses the consequences of not seeking a lender’s consent to a side letter which was recently examined and considered inter alia in the case of Lindat Ltd v The PW Plaza Café Bar Ltd [2024] IEHC 355 (Lindat). In this case the tenant sought inter alia to rely on a second side letter when seeking relief against a forfeiture notice served by the landlord which the tenant claimed was invalid.

Facts of Lindat Case

Lindat related to the lease of the public house known as the Donaghmede Inn at Grange, Baldoyle, Dublin 13 forming part of Donaghmede Shopping Centre. The lease (Lease) was granted on 22 September 2020 between the plaintiff/landlord, Lindat Ltd (Plaintiff) to the defendant/tenant, PW Plaza Café Bar Ltd (Defendant) for a term of ten years at a market rent of €80,000. The Lease was granted during Covid-19. Evidently, no refurbishment works could be carried out nor could the premises trade for business.

In the circumstances, it was agreed between the Plaintiff and the Defendant that the Lease would contain a clause suspending the rent payable during the COVID-19 restrictions. This was contained in clause 5.18 of the Lease. Coupled with this was a side letter dated 22 September 2020 (Side Letter 1) confirming that the rent payable would be abated for the first two years of the term. Endeavour Personal Finance (EPF) was the lender and both the Lease and Side Letter 1 were issued to it for its approval and consent as required by s.112 of the Land and Conveyancing Law Reform Act 2009 Act (2009 Act). The following day an additional side letter (Side Letter 2) was entered into between the parties providing that the Defendant did not have to pay rent, service charge, insurance etc. until “the premises has commenced trading”. However, the time limit concerning the completion of the fit-out works and commencement of the Defendant’s trade, which is usually required for certainty in relation to the payment of the rent and outgoings, had been left open-ended. Furthermore, it abated the rent by fifty per cent for two years from when the rent was payable, i.e. the Defendant commenced trading. The consent of EPF was not sought in relation to Side Letter 2.

When the Lease was granted, it was between two companies forming part of the same property group company. The Plaintiff was originally part of Harcourt Developments Group. On 19 July 2023 a new company, Marisola Ltd, took ownership of the shares of the Plaintiff and acquired its interest in the Lease. The Defendant is also part of Harcourt Developments Group.

The Plaintiff served a forfeiture notice on 8 August 2023 on the Defendant for arrears of rent and service charges. The Plaintiff then re-entered by a master key to take possession of the public house and requested the delivery of the publican’s licence (Licence) and the restaurant certificate from the Defendant. The Plaintiff then issued proceedings seeking interim and interlocutory orders for the return of the Licence without which the Plaintiff was prevented from leasing the premises to another tenant. The Defendant resisted the request on the basis that the forfeiture of the Lease was invalid due to Side Letter 2 and the Plaintiff was estopped on account of the Defendant expending monies on the premises in excess of €250,000.

Findings

Nolan J held that Side Letter 2 could not be relied upon, although on the face of it, it appeared unambiguous, as it was entered into without the consent of the lender EPF. He had concerns about how Side Letter 2 was created. Even though EPF’s consent was not sought to Side Letter 2, the then owners of the Plaintiff and the Defendant agreed that Side Letter 2 could bind the Plaintiff, the Defendant and third parties. Although the legality of Side Letter 2 will be decided at the plenary hearing, it appeared to Nolan J that it came into existence “by subterfuge”. It sought to bind the new owners of the shares in the Plaintiff into an agreement where the date for commencement of the payment of rent, rates etc., was left open-ended.

He also held that there was no consideration, and any possible consideration was the granting of the Lease referred to in Side Letter 1. Additionally, he did not accept that the Defendant did not have possession where it carried out refurbishment works. The carrying out of works amounted to possession. On the balance of probabilities, Nolan J found at the interlocutory stage, that there was a strong case for holding the forfeiture valid.

Takeaways

Lindat underscores how important it is for a lender’s consent to be sought for all leasing documents entered into including, but not limited to, side letters in accordance with section 112 of the 2009 Act. Also, when the contracting parties are related that there is independence and that the terms are acceptable to a successor in title/incoming assignee.

Additionally, it demonstrates the impact of a side letter being rendered invalid. A tenant may be prevented from seeking reliefs, equitable or otherwise sought against a notice served by a landlord; the tenant may be prevented from availing of the reliefs sought. In Lindat where the Defendant was seeking equitable relief against a forfeiture notice and relying on the doctrine of promissory estoppel, it was prevented from availing of the reliefs sought for reasons outlined therein including the invalidity of Side Letter 2.

This Moran & Ryan LLP material is not intended to provide, and does not constitute or comprise, legal advice on any particular matter and is provided for general information purposes only. You should not act or refrain from acting on the basis of any information contained in this material, without seeking appropriate legal or other professional advice.

Louise Wright
Partner
T: + 353 1 5450374
E: lwright@moranryan.com