Date 1 January 2006
New provisions restricting a landlord’s right to forfeit a lease on its tenant’s default came in to force on 28 February 2005. Sections 167 to 171 of the Commonhold and Leasehold Reform Act 2002 requires a Landlord to jump through more hoops before it can exercise its right to forfeiture.
Firstly, a landlord’s right to forfeit has been abolished for all debts under the prescribed sum (currently set at £350) unless it has been outstanding for a prescribed period (currently set at 3 years). For many long residential leases this could prevent an effective method of collection of ground rent/service charges for up to 3 years. Further, to ensure that this legislation is not circumvented by the inventive, any default charges (ie a charge for non payment) will be excluded when calculating the prescribed sum so a landlord can not top up arrears to exceed the prescribed sum to allow forfeiture immediately.
Secondly, where a landlord wishes to exercise its right to forfeit for a tenants default other than for non payment of rent it will need to show an admission from the tenant or a determination from the Leasehold Valuation Tribunal that the tenant is in default before it can even serve a S.146 notice, the pre-cursor to bringing forfeiture proceedings. In the event that a determination by the Leasehold Valuation Tribunal is necessary it is important to note that the determination will only state whether the tenant is in breach of its lease and will not consider the important questions of waiver and/or relief from forfeiture which the tenant can raise following the service of a s.146 notice and/or forfeiture proceedings, giving the tenant a second bite at defending its default and resulting in increased (and possibly irrecoverable) costs for the landlord.
Landlord’s must also note that it remains the case that in order to forfeit for non payment of service charges an admission of the service charge due or a determination from the leasehold valuation tribunal as to the sums due will still be necessary.
These restrictions have made the right to forfeit a more time and cost consuming exercise and detailed advice on the procedure and options should be sought.
For further advice or guidance, please contact Lynsey Newman on 01727 798092 or by email at lynsey.newman@salaw.com
© SA Law 2006
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