It may not surprise you to learn that on discussing forfeiture at a recent conference with a group of property lawyers and managers, most were in favour of the landlords ability to forfeit a lease. The main reason being the responsibility of fair management of the building, thus ensuring that no leaseholder is prejudiced by the actions, or perhaps inaction, of any other leaseholders and that the landlord and any managers do not suffer any loss.
This approach assumes that landlords seek to deal with matters fairly. Whilst the vast majority may do so, (although recent reporting in relation to the ground rent scandal and abuses of leasehold law may cause doubt), some may not, therefore it is necessary to consider what checks and balances are in place to protect leaseholders from forfeiture and sharp practice. Consequently a further question then arises as to what hoops Landlords have to jump through to obtain forfeiture of the lease, and what happens as a result?
In the first instance, there must be a breach of the lease on the part of the tenant. It is advisable for leaseholders to read and become familiar with the terms of their lease. As the old adage goes – prevention is better than the cure. It is important to note however, that in the event of a breach, forfeiture cannot even be contemplated unless either the First Tier Tribunal (FTT) or the Court determine as much.
In a recent case where the lease has been forfeit, the breach arose as a result of non payment of service charges following major works. The flat owned by my client was, by virtue of years of neglect and a lengthy dispute (including works undertaken within my client’s demise and without their consent) uninhabitable. The matter neared settlement at one stage, with a lease extension being agreed but after months of intermittent solicitor’s correspondence, with both parties instructing different solicitors at different stages, matters appeared to be left in abeyance. Some time later my client decided to undertake improvements at the flat, believing matters had concluded, or at the very least having heard nothing further that there was no immediate issue. However, during the course of the works an ominous letter was found in the post box which detailed the Landlord had:
- Applied to the FTT to obtain a determination that there had been a breach of lease
- Purported to serve a s.146 notice – the notice for the tenants setting out what is required to be done and when to remedy the breach, failing which forfeiture can take place if the lease allows
- Applied to the County Court for possession of the property, which was subsequently granted as the application was unchallenged.
My client was entirely unaware of all of the above and therefore had at no point been able to engage and remedy/challenge the Landlord. To this end, an order was made by which my client lost the only property she owned and the landlord swiftly granted a new lease for a premium.
In this case, the breach was non payment of service charges although there is a dispute over the service address. The tenant was ready, willing and able to pay the service charges, despite her view that the fees are unfair, which was made clear to the Landlord so the lease may be reinstated as it was. However, the Landlord chose not to accept this as the case, preferring instead to retain the leasehold interest and resist the Tenant’s case. This was some 5-6 months after the possession order. Litigation therefore followed and is ongoing.
The Tenant in circumstances such as this is required to either accept the loss of the flat, or fight on. In either scenario, the tenant suffers a devastating financial and emotional blow. My client was deprived of her flat by a process she had not been involved in, it cannot be that a person’s home can be removed without their knowledge, but at the same time, it cannot be that a landlord suffers uncertainty in terms of payments of service charges indefinitely.
Where is the balance?
It cannot be assumed that forfeiture is only used in circumstances where there is a terrible tenant and/or where there is a greedy or unscrupulous landlord. To my mind the answer cannot only be that tenants must have a better understanding about their lease, what they can and cannot do and what they must do but Landlords and their managers and agents must also ensure that they approach matters using best practice, and dare I say it, common sense.
As a property litigator I often see how a dispute could have been avoided and where things may have gone awry, for both tenant and landlord clients. If in doubt advice from a specialist as early as possible can save time, anxiety and money for all involved.