This article first appeared in NewsBrief, Winter 2004/05
Forfeiture is the ending of a lease and repossession by the landlord where conditions have not been met by the tenant, such as breach of covenants or non-payment of rent. There are a number of restrictions on the landlord’s use of forfeiture. For example, in the case of a residential lease, the landlord cannot recover without obtaining a court order. Under the Protection from Eviction Act 1977, unlawful eviction is a criminal offence. Also, provisions in the Housing Act 1996 prevent landlords exercising forfeiture for unpaid service charges unless the service charge is agreed, has been admitted by the tenant, or has been determined by a decision of a court or arbitration tribunal.
However, it has still been possible for a leaseholder to lose his home for a minor breach of covenant or for the non-payment of only a few pounds of the rent due. The Commonhold and Leasehold Reform Act 2002 (the “Act”) contains provisions (which are being introduced over time) that further restrict the use of the right of forfeiture. These provisions came into effect on 28 February 2005 .
The new provisions
Service charge demands must now be accompanied by a summary of rights and obligations of leaseholders in relation to service charges. In this way, leaseholders will be made aware of their rights to challenge charges which they consider unreasonable and of the proposed restrictions to the use of forfeiture. The Act provides leaseholders with similar rights in relation to administration charges.
Ground rent will not now be payable by a leaseholder unless a written notice has been issued. If the rent is paid by the due date specified in the notice, any provision in a lease for penalties for late payment will be inapplicable.
The Act states that forfeiture cannot be used for non-payment of debts below a prescribed sum unless the debt has been outstanding for more than a prescribed period. The prescribed sum and period are set out in Regulations made under the Act. These Regulations state that forfeiture can only be used where the sum outstanding exceeds £350 and has been outstanding for a period of three years or more.
Where the landlord wishes to forfeit a lease, the landlord must serve a notice on the leaseholder giving details of any alleged breach of covenant or condition. The leaseholder then has a reasonable period in which to rectify matters. Under new provisions in the Act, such a notice cannot be served unless the following criteria have been met:
There was a general concern that vulnerable leaseholders could fail to respond to communications from the landlord and court and subsequently lose their homes by default. For example, this could happen where a person has a poor understanding of English or has to go into hospital for an extended period. Additional requirements may be introduced in the future to address this concern. For example, landlords could be required to place a notice in the local newspapers before forfeiture proceedings are commenced. This could alert friends, relatives and professional carers in the locality that the landlord is trying to locate the leaseholder.
