Forfeiture of a residential lease: what it means and your rights

Forfeiture is a legal process by which a landlord can bring a long lease to an end because a leaseholder has breached one of the terms of the lease. It is most commonly used when a leaseholder has failed to pay service charges, ground rent, or other sums due under the lease. Understanding forfeiture is important because losing a long lease can mean losing a home that the leaseholder has paid a substantial sum to buy.

Who does forfeiture affect?

Forfeiture affects leaseholders, people who own a long lease (typically 99, 125, or 999 years) on a flat or house, rather than short-term tenants renting on an assured shorthold tenancy. If you rent your home on a standard tenancy agreement, forfeiture does not apply to you. If you own a leasehold flat and pay service charges or ground rent to a freeholder or management company, it may apply.

When can a landlord forfeit a lease?

A landlord can only forfeit a lease if:

1. The lease contains a forfeiture clause (most do)
2. There has been a breach of the lease
3. The correct legal procedure has been followed

The most common reasons for forfeiture proceedings are:

• Non-payment of service charges or ground rent
• Breach of a tenant covenant (for example, subletting without consent, making alterations without permission, or causing nuisance)

The legal protections for residential leaseholders

The law provides significant protection for residential leaseholders against forfeiture. These protections mean that forfeiture cannot happen simply because a landlord decides to proceed.

No forfeiture without a tribunal determination: under Section 168 of the Commonhold and Leasehold Reform Act 2002, a landlord cannot forfeit a lease based on a breach of covenant (other than non-payment of rent, service charges, or administration charges) unless a court or tribunal has first determined that a breach has occurred and the leaseholder has had an opportunity to remedy it.

Section 146 notice: before forfeiting for breach of any obligation other than rent, the landlord must serve a Section 146 notice (under the Law of Property Act 1925) specifying the breach, requiring it to be remedied, and allowing a reasonable time to do so.

Disputed service charges: a landlord cannot forfeit for non-payment of service charges unless the charges have been agreed by the leaseholder or determined as payable by a tribunal. This is a significant protection, many leaseholders successfully challenge service charge demands.

Waiver: a landlord who accepts rent or service charges after becoming aware of a breach may have waived the right to forfeit for that breach.

Relief from forfeiture

Even if a court grants a forfeiture order, leaseholders have the right to apply for relief from forfeiture. Relief is a discretionary remedy by which the court reinstates the lease on condition that the leaseholder remedies the breach (for example, by paying the outstanding sums). Courts almost always grant relief in residential cases where the leaseholder can pay what is owed and the breach was not deliberate.

Forfeiture for very small sums

The Commonhold and Leasehold Reform Act 2002 prevents forfeiture proceedings being started where the unpaid amount is less than £350 or has been outstanding for less than three years. This is a hard statutory floor, many service charge disputes involve amounts well below the threshold at which forfeiture becomes a practical risk.

What to do if you receive forfeiture proceedings

If you receive a Section 146 notice or court proceedings related to forfeiture, you should take legal advice promptly. The time limits within which you can respond or apply for relief are important.

Steps to take:

• Do not ignore the notice or proceedings
• Check whether the underlying service charge or breach has been validly determined
• Consider whether you have any basis to challenge the underlying demand
• Apply for relief from forfeiture if proceedings are issued

Leasehold Advisory Service

The Leasehold Advisory Service (LEASE) provides free advice to leaseholders on service charges, lease disputes, and forfeiture. They can be a useful first port of call before instructing a solicitor.

When should I contact Support for Tenants?

Our work focuses on housing disrepair claims, if your landlord has failed to maintain the structure or common parts of a building you hold a lease on, you may have a disrepair claim regardless of any forfeiture proceedings.

Call us on 0800 030 4669. No upfront cost. You only pay if you win, and the fee comes out of the compensation, not your pocket. If you don't win, you pay nothing.

Sources

• Commonhold and Leasehold Reform Act 2002 (legislation.gov.uk)
• Section 146, Law of Property Act 1925 (legislation.gov.uk)

Related articles

• Section 21 notice, form 6A requirements