The landlords’ nuclear weapon: Forfeiture and possession of your home
Below is the information from the Leasehold Advisory Service about lease forfeiture, of such unutterable blandness that it had better be reproduced in full.
Reading it, you would not get the impression that lease forfeiture is the most draconian power conceivable.
Or that everyone – even in those in leasehold sector – believes that the windfall element of forfeiture is fundamentally wrong.
It allows speculators in residential freeholds, who pay maybe 1-3% of the collective value of a block of flats for the freehold to render destitute and homeless those who cross them in a money dispute.
The Law Commission advised ending the windfall element of lease forfeiture in 2006; it is now being revised and updated. Hopefully it will actually be enacted, along with the other leasehold reforms.
It is not controversial. How can it be right that a pensioner like Dennis Jackson, disputing £6,000 of service charges which led to an £80,000 legal bill, could have his £800,000 flat forfeited in a 10-minute hearing at Wandsworth County Court?
Or that Charles McCadden, an inconsiderate neighbour who put in a new bathroom in his £600,000 upstairs maisonette without asking the downstairs freeholder’s consent? She now appears to own this property.
Had it been the other way round, and the freehold-owning maisonette owner acted inconsiderately, what would have been the consequence? A noise abatement order from the council, perhaps?
Forfeiture is absolutely daft, and it is threatened routinely in landlord and tenant disputes. About 80 forfeiture cases a year actually go through, according to LKP.
Little less appreciated by leaseholders is that a section 146 forfeiture notice is about the only way a landlord can get a leaseholder to pay up what a court has decided is owed.
Here is the Leasehold Advisory Service explaining the law:
If you fail to pay service charges, ground rent or administration charges which are due, you could face action from your landlord. This could include your landlord applying for a county court judgment, asking your mortgage company to pay the arrears and add these to the amount outstanding on your mortgage and, finally, taking action to end the lease and repossess the house or flat.
By law, your landlord has the right to take this action, but they cannot take back possession of your home without a court order. They must generally start the process of action to take back possession of your home by serving a valid notice of seeking possession under section 146 of the Law of Property Act 1925 (a section 146 notice).In practice, few landlords enforce the action to the point where they gain possession of the house or flat, but serve a section 146 notice as a way of encouraging a leaseholder to pay charges which they owe, or to correct a situation where the leaseholder has broken the terms of the lease.
The misuse of the process in some instances has led to significant changes to the procedures. Landlords now have to prove that a leaseholder has broken a condition in the lease before they can serve a valid section 146 notice. There are also controls preventing landlords from using this procedure to recover very small amounts.
Your landlord cannot serve a valid section 146 notice unless you have agreed that you owe the money (eh? who on earth would do such a thing – LKP) or have broken the lease, or the tribunal, a court or an arbitrator has made a final decision that you have broken the lease. A decision becomes final at the end of any period allowed for appeal, and your landlord cannot serve a section 146 notice until 14 days after that date.
If there is a dispute about charges that you have not paid (arrears), your landlord must also apply to the tribunal to confirm that you owe the amount and that it is reasonable.
So, before your landlord can serve a section 146 notice:
- you must have agreed that you have broken the lease and that you owe any arrears; or
- the tribunal must confirm that you have broken the lease.
The following conditions also apply.
If you owe any charges, the landlord must be allowed to charge these and the amount must be reasonable.
After the decision of the tribunal, court or arbitrator becomes final, you must be allowed a further 14 days in which to take action to make sure you are no longer breaking the lease or to settle the arrears.
If, after 14 days, you have not paid the arrears or are still breaking the lease, your landlord can service the section 146 notice.
Failure to pay a small amount of charges for a short period
Your landlord cannot serve a valid section 146 notice unless the amount of service charges, administration charges or ground rent you owe (or a combination of all of these) is more than £350, or is made up of, or includes, an amount that has been outstanding for more than three years.
If your landlord is not eligible to issue a section 146 notice, they can take other action to recover their money, such as through the small claims court, so you should not use the rules as a way of withholding money that is legally and reasonably charged under the terms of the lease.