A Section 146 notice of the Law and Property Act 1925
LKP will always try to help leaseholders facing forfeiture, homelessness and destitution:
sok@leaseholdknowledge.com
martin.boyd@leaseholdknowledge.com
020 8050 2602
07808 328 230
Leasehold forfeiture: why is LEASE so pathetic over this, too?
And more here:
Two flats a year face forfeiture in constituency of housing minister Gavin Barwell
Forfeiture is the nuclear weapon in the hands of a landlord: whose freehold ownership may be worth as little as 1% of the value of a block of flats (3% is more normal). Yet, he is theoretically the building’s owner and owns the land on which it stands. So he makes all the decisions.
Forfeiture is threatened daily in the leasehold sector to encourage leaseholders to pay up.
LKP does not have an issue with the repossession of a property, where someone absolutely refuses to pay their share, or who breaches one of the core terms of a lease.
What is unfair is the loss of the lease, and any capital and loans attached to it for the financial benefit of the landlord.
No one defends this nonsense, and the Law Commission recommended its ending in 2006. But nothing has been done. This report on forfeiture is now being revised and urged by the Law Commission as part of its reforming initiatives in leasehold. The other areas are enfranchisement, right to manage and commonhold. We can expect sight of some of these initiatives by end of 2019.
What happens when money is owed is this: the landlord issues a couple of reminders, which maybe adds a couple of hundred pounds to the debt.
The debt is then handed over to a debt collector, which is usually a firm of solicitors (although the actual work here is clerical).
The landlord does not pay the debt collectors: they are remunerated by levying charges on pursuing the debt. So they are rewarded by pursuing the debt aggressively.
A debt of a few hundred is quickly well over £1,000, at which point the leaseholder often tries, and fails, to pay the outstanding debt but not the inflated legal costs.
This go up with every printed off reminder, making the leaseholder even more reluctant to pay.
If there is a mortgage, the debt collectors contact the bank and state that they are going for forfeiture under Section 146.
Banks often panic, step in and pay the debt because their mortgage is at risk, adding a compulsory loan to the leaseholder’s account.
Many leaseholders are indignant about this: they would far prefer to fight it all out in the property tribunal. They are completely mistaken in wanting to do this in these circumstances.
Sometimes the banks are very laid back. LKP had a case where the Yorkshire Building Society simply replied that it would wait to see what happened in court. This was a lethal response, as it encouraged the leaseholder to continue to withhold the money demanded and have a day in the property tribunal.
If the leaseholder is lucky, s/he will get in touch with LKP, which will advise the immediate payment of the outstanding debt and the legal costs. And then make clear that this issue is going to be raised publicly and fought in the courts.
This Chinese lady saw the debt collectors’ inflated £2,000 legal fees over a £300 ground rent debt evaporate by half.
Leaseholders should do what LKP repeatedly advises: PAY FIRST, FIGHT SECOND.
It is lethal for leaseholders to withhold money – particularly ground rent – and then be found to be in breach of lease. The legal costs involved will dwarf the original sum contested.
It is worth noting, and dismissing, the oft repeated statement that the county courts go out of their way to avoid forfeiture. If a sum of money has not been paid, when it should have been, the matter is dealt with very quickly.
Dennis Jackson had his £800,000 Battersea flat forfeited in 10 minutes flat by Wandsworth County Court. It took all the efforts of LKP and Sir Peter Bottomley to reverse this injustice.
Dennis Jackson at Plantation Wharf: An £800,000 forfeiture over-turned by LKP
When forfeiture is threatened, as in the case of Charles McCadden (above), following a breach of lease, the Section 146 notice must
- specify the breach complained of,
- importantly if the breach is capable of remedy, require the leaseholder to remedy the breach, and
in any case require the leaseholder to make compensation in money for the breach.
Woman has £165,000 flat forfeited over what began as £290 ground rent demand
The leaseholder is afforded a reasonable time to remedy the breach if it is capable of remedy following service of the section 146 notice.
Court proceedings cannot be commenced unless the leaseholder fails within a reasonable time to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money for the breach, to the satisfaction of the landlord.
Unfortunately, in the McCadden case he declined to engage with the court process and thereby presented a £600,000 maisonette as a gift to his freehold owning neighbour.
The case cannot more clearly illustrate the injustice of forfeiture.
Had it been the freehold owning neighbour who was making a nuisance of herself with building works, Mr McCadden would have been lucky to get a council noise abatement order. On the other hand, he as a leaseholder has lost his home.
See also
https://www.leaseholdknowledge.com/lkp-guide-to-the-property-tribunal
Leasehold forfeiture: why is LEASE so pathetic over this, too?
And here is an example of a similar property where forfeiture went horribly wrong. It comes from the excellent website Nearly Legal, run by solicitor Giles Peaker:
Game of forfeits – Nearly Legal: Housing Law News and Comment
Golding v Martin (2019) EWCA Civ 446 It seems to be a bit of a thing, buying a leasehold flat, then leaving it unoccupied, moving abroad and forgetting about rent and service charges. Semi-fortunately for the leaseholder in this second appeal, the outcome was different to this previous example of doing that, but still the …
