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

Forfeiture is a legal process. It lets a landlord end a long lease early. They can do this if a leaseholder breaks one of the lease terms. It is most often used when a leaseholder has not paid service charges, ground rent, or other money owed under the lease. Forfeiture matters because you could lose your home. That is a home you paid a large sum to buy.

Who does forfeiture affect?

Forfeiture affects leaseholders. A leaseholder is someone who owns a long lease on a flat or house. A long lease usually runs for 99, 125, or 999 years. It does not affect short-term tenants who rent on an assured shorthold tenancy. So if you rent your home on a standard tenancy agreement, forfeiture does not apply to you. But it may apply if you own a leasehold flat and pay service charges or ground rent. You would pay these to a freeholder or management company.

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 gives residential leaseholders strong protection against forfeiture. These protections mean a landlord cannot just decide to forfeit and go ahead.

No forfeiture without a tribunal determination: this comes from Section 168 of the Commonhold and Leasehold Reform Act 2002. A landlord cannot forfeit a lease for a breach of covenant unless a court or tribunal has first decided that a breach has happened. The leaseholder must also have had a chance to put it right. This does not cover non-payment of rent, service charges, or administration charges.

Section 146 notice: this applies before forfeiting for any breach other than rent. The landlord must serve a Section 146 notice (under the Law of Property Act 1925). The notice must say what the breach is. It must ask for the breach to be put right. It must give a reasonable time to do so.

Disputed service charges: a landlord cannot forfeit for unpaid service charges in every case. They can only do so if the leaseholder has agreed the charges, or a tribunal has decided they are payable. This is a strong protection. Many leaseholders challenge service charge demands and win.

Waiver: a landlord may know about a breach and still accept rent or service charges. If they do, they may have waived the right to forfeit for that breach.

Relief from forfeiture

A court may grant a forfeiture order. Even then, leaseholders have the right to apply for relief from forfeiture. Relief is a discretionary remedy. With it, the court puts the lease back in place. The condition is that the leaseholder puts the breach right, for example by paying the money owed. In residential cases, courts almost always grant relief. This is true 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 stops forfeiture proceedings starting for small or recent debts. They cannot start where the unpaid amount is less than £350 or has been owed for less than three years. This is a hard statutory floor. Many service charge disputes involve amounts well below the level where forfeiture becomes a real risk.

What to do if you receive forfeiture proceedings

You may receive a Section 146 notice or court proceedings about forfeiture. If so, you should get legal advice quickly. There are time limits for when you can respond or apply for relief. These time limits matter.

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) gives free advice to leaseholders. They cover service charges, lease disputes, and forfeiture. They can be a useful first place to ask before you instruct a solicitor.

When should I contact Support for Tenants?

Our work focuses on housing disrepair claims. Your landlord may have failed to look after the structure or common parts of a building you hold a lease on. If so, you may have a disrepair claim. This is true whatever happens with 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