Forfeiture of a Residential Long Lease
Generally speaking, forfeiture is the right for a landlord to terminate their leaseholder’s long lease where the leaseholder is in breach of covenant.
To begin with, there must be a provision in the lease allowing a landlord to enforce the covenants in the lease, to include initiating forfeiture proceedings. Those provisions are fairly standard in most residential long leases. However, if those clauses do not exist and a landlord tries to forfeit then the repercussions for the landlord can be significant.
Examples of the grounds under which a landlord may forfeit (if the lease allows) include the following:
- When a leaseholder carries out activities not authorised in the lease, such as subletting without permission;
- When a leaseholder carries out unauthorised alterations to their premises;
- Failure to pay service charge or ground rent.
In order for a landlord to start the process they must serve what is called a section 146 notice. For that notice to be valid, either the leaseholder will need to have admitted the breach (so if you are a leaseholder it is important that you do not do this either deliberately or otherwise) or a landlord must first obtain a determination (normally from a court or tribunal) that the leaseholder is in breach of covenant. This notice will include information about the breach of the lease. It is important to note there is no automatic right to apply for an order authorising forfeiture; a leaseholder must generally be given the opportunity to remedy any breaches.
If the breaches remain following a reasonable time after the service of a valid section 146 notice then a landlord may apply to the court for a possession order.
However, that is not the end of the matter. A leaseholder still has the right to apply for relief from forfeiture. The court has a very wide discretion on whether to grant relief and will take all of the circumstances of the matter and conduct of the parties into consideration. In deciding whether to grant or refuse forfeiture it will be guided by the principle that the right to forfeit is merely a mechanism to ensure the performance of the covenants in the lease. So provided the landlord can be put in the same position as it was before the breach and forfeit occurred then relief should generally be granted.
If you would like more information or require assistance in this area then please contact Daniel Winslow, Partner and head of this firm’s Leasehold Services department.
Does the above apply also to breach of covenant, e.g. non payment of the share of the building insurance?
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