Forfeiture of a Lease

This is the process by which a landlord or management company apply to terminate the lease to a property early due to the breach of one or several covenants. This article will look at the way in which to apply for forfeiture due to service charge arrears.

Due to the severity of terminating a lease early, effectively taking away someone’s home, forfeiture is a last resort. In terms of service charge recovery I believe there to be a few steps necessary to carry out before forfeiture can even be considered. I suggest you look at our guidance on service charge recovery for more details.

Legislation brought in via The Commonhold and Leasehold Reform Act 2002 changed how a landlord should issue forfeiture proceedings for non payment of service charges. The Act has placed qualifying criteria on forfeiture proceedings.

The legislation states that arrears of a certain age can not be recovered; in the case of service charges there can be no recovery after a twelve year period from when the arrears first became due. The legislation also prohibits forfeiture being applied for on debts of a small amount or covering a small period. The legislation defines a small amount as £350 (this can not include any legal costs or interest) and a small period as 3 years.

Therefore for a debt to qualify for forfeiture it must be more than £350, owing for more than three years but not have been owed for more than 12 years.

If the debts do qualify for forfeiture then it is time to issue the forfeiture notice. However the notice can not be legally served unless either the leaseholder admits the breach or a determination is awarded by the LVT. In instances where the leaseholder disputes the action being taken then the LVT will have to be consulted before issuing any notice.

After the above has been satisfied the forfeiture notice can be served and the lease prematurely ended.