Advice needed about forfeiture of lease (leaseholder in arrears)

Advice needed about forfeiture of lease (leaseholder in arrears)

11:02 AM, 15th October 2014, About 7 years ago 13

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Background:

One of my rental flats has a shared freehold. There are only 4 flats and 4 leaseholders/joint freeholders, including myself.

All four flats are currently let to tenants under ASTs.

No ground rent is payable.

As leaseholders, we are all supposed to pay a £500 pa maintenance charge. One of the leaseholders/joint freeholders has been constantly in arrears with this since at least 2011, and owes the freehold trust well in excess of the £350 minimum required under the Commonhold and Leasehold Reform Act 2002 to begin forfeiture proceedings.

The property has required considerable maintenance works over the past few years, a large proportion of which I’ve paid for personally, on behalf of the freehold trust.

Because I am in credit to the trust (which they acknowledge) I haven’t made maintenance payments for the past 4 years, but as stated, neither does one of the other leaseholders – at least only sporadically, and this person most definitely isn’t in credit.

The trust therefore has only had £1000 pa paid to it over the past 3 years. As a result, it is now in arrears and is unable to pay a large outstanding bill.

The leaseholder who owes the money owns at least one other property, mortgage free, which is worth a lot more than the flat, and a business.

The manager of the trust has been threatening the leaseholder in arrears with approaching his mortgage company to pay the outstanding debt and add it to the mortgage. However, after reading some previous posts on 118 on this subject, particularly comments from Chris Amis, I am wondering if forfeiture might be the better option, but after looking into it, I have some serious reservations.

Questions:

I only have an overview of the procedure required under the 2002 Act, which is basically to prove the leaseholder is in breach of obligations, the easiest way being by small claims procedure (MCOL), then serve Section 146 notice on the leaseholder, allowing 14 days after Court judgement.

However, I gather that in reality this isn’t so straightforward, for example with courts reluctant to grant forfeiture, and appeals by the defendant. I am also concerned about the Doctrine of Waiver whereby anything the landlord does or doesn’t do that suggests the lease is still in existence can waive the forfeiture – I’m thinking in this instance of the leaseholder’s tenant, who we have no quarrel with and certainly wouldn’t want evicted, but would allowing the tenancy to continue (which was granted under the lease) be acknowledging the lease’s continuation, and therefore invoke the Doctrine?

I would therefore like to know if anyone has ever done this, particularly where the flat has been sublet to a tenant, and what was the outcome?

Also, would it perhaps be more cost effective and quicker to approach the leaseholder’s mortgage company, as the trust manager intends BUT at the same time advising them that if the trust does not get satisfaction by a certain date, forfeiture proceedings will be started? At the moment, cost is an issue for the trust and the joint freeholders, so this is another factor in choosing to go to the mortgage company and not start legal proceedings.

Many thanks in advance for your advice – please get back to me if you need to clarify anything first.

As a footnote, I’d like to add: this is the downside to shared freeholds, which are all well and good if there’s plenty of money to pay maintenance, but not otherwise. In my experience, a well run and fair traditional management company is much better for a small freehold.

Many thanks

Mandy

forfeiture of lease



Comments

by NEIL T

9:41 AM, 18th October 2014, About 7 years ago

Would ground rent come under service charges, in relation to the time limitation criteria please?

by Ollie Cornes

10:15 AM, 18th October 2014, About 7 years ago

No, Gary. The rules for ground rent are different. You have to use a standard format for the demand and the period you have to collect is longer. The LEASE web site explains the process in detail. I used it to demand ground rent from a leaseholder who happens to be a leasehold lawyer and it was paid so LEASE gave me what I needed to know to get paid.

by Mandy Thomson

10:20 AM, 18th October 2014, About 7 years ago

Reply to the comment left by "neilt " at "18/10/2014 - 09:41":

I was just looking at this on the the Leasehold Advice website. Fortunately, the answer is "no" - this is simply subject to the general Limitation Act 1980 which gives any aggrieved party six years in which to recover a loss (e.g. this is the same for actions taken under Consumer Law). http://www.lease-advice.org/information/faqs/faq.asp?item=178


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