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Forfeiture of Residential Tenancies

Friday, 4 April 2014

Residential leases usually contain a right for the landlord to forfeit the lease if the tenant fails to comply with certain conditions. The most common reason for forfeiture is non-payment of rent but it can also apply to other breaches of lease terms.

Forfeiture is generally applicable to long term leases such as 99, 125 and 999 year leases. Tenants under these types of leases, or leaseholders as they are commonly referred to, threatened with forfeiture can apply for relief as soon as they are issued with a notice to forfeit under s.146(1) of the Law of Property Act 1925.

If a lease is forfeited, the landlord can then seek to regain possession of the property.

Long-term Lease Obligations

Properties such as flats and maisonettes are usually held on long leases with the freehold being held separately by the landlord; houses can also be held as leasehold property.

Long term leases contain provisions for the payment of ground rent, which may be nominal, and often for other payments such as service charges and reserve funds to help with the management and maintenance of the building. In addition, leases will usually contain clauses to set out the rights and responsibilities of the parties.

Landlords are normally responsible for maintaining the common parts of buildings such as the exterior and structure. Tenants’ obligations usually require that they: maintain the interior of their property, request the landlord’s permission to alter or sublet their property and refrain from doing things that might cause damage to the building or a nuisance to their neighbours.

Failure on the part of the tenant to meet their obligations could lead to forfeiture. If the tenant is in occupation, the landlord will be unable to forfeit by peaceable re-entry and will need to follow strict procedures.

Leaseholder is in Breach of their Lease Obligations

If a leaseholder is in breach of their obligations then the landlord may wish to remove them from the property by forfeiting the lease and asserting their right to re-entry. Before bringing an action to forfeit the landlord must follow certain procedures depending on the circumstances:

1. Non-payment of rent –the landlord must issue a formal demand in the prescribed form, containing certain information such as the amount due and the period for which it is payable. There is a lower limit of £350 that must be owed in rent or rent and other charges to prevent landlords from attempting to bring forfeiture proceedings for relatively small sums. Otherwise amounts must have been outstanding for more than 3 years.

2. Non-payment of service charges – the disputed charge must first be “finally determined” by the First-tier Tribunal (Property Chamber) or the tenant must have admitted that it is payable.

3. Breaches of other covenants – If the breach is disputed, it must first be “finally determined” by the First-tier Tribunal (Property Chamber) or the tenant must admit the breach. The landlord must serve on the leaseholder a ‘s146 notice’ containing prescribed information including details of the breach and providing for a reasonable time to remedy it or compensation.

If a “reasonable period” of time has passed after a section 146 notice is served without the breach being remedied, the landlord can start forfeiture proceedings.

The tenant can apply to the court for relief from forfeiture. The court may decide that the lease is forfeit which is effective from the point that the original notice was served or it may grant relief on specified terms which, if complied with, means the lease is reinstated.

If the tenant does not apply for relief or their application is rejected, the landlord can seek possession through the court.

For specialist advice contact Peter Gourri today by email or telephone 0207 611 4848.

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