Forfeiture – is it right?

Parliamentary legislation has placed restrictions upon the exercise of this right in relation to ground rents and service charge arrears; of particular importance is that the debt has to be over £350 or three years old. This means that should a tenant have arrears that meet either of these conditions the landlord can seek possession of the entire property, even if the debt is relatively minimal compared to the overall value of the property once back in the landlord’s possession.

Landlords are sometimes reluctant to exercise this right where it is going to cause particular hardship on the tenant, especially in circumstances where the debt is minimal. However, this is sometimes the only remedy available to the landlord. Even if the landlord should obtain a windfall from taking possession this should not automatically bar the landlord from being able to exercise this right.

In the majority of cases the landlord has the additional benefit of being able to recover the legal costs of taking forfeiture action directly from the leaseholder. This means that the landlord rarely has to pay for any of the costs related to forfeiture.

The courts appreciate that landlords do not set out to cause undue hardship when steps are taken to repossess the property. The tenant does have a right to apply for relief from forfeiture if it chooses but will have to show sufficient grounds for this to be granted.

If the tenant is aware that the property is going to be repossessed it puts a real and immediate pressure on the tenant to obtain alternative sources of funding. If the tenant does not have alternative sources available to it then it is correct for the landlord to take back its property as the situation is only likely to get worse - i.e. an accrual of substantial arrears that will then leave insufficient funds for the landlord to be able to provide the services required on site.

From the landlord’s perspective it has been given rights by Parliament and through the terms of the lease to take back its property if the tenant defaults.

From the tenant’s perspective it will be aware of the draconian consequences should it not make payment (or remedy any other breach of lease) and therefore should make it a priority to secure the resources required in order to remedy the breach and if this is not possible, accept that the landlord is entitled to take back its property.