Once it has been determined by the FTT that the leaseholder is required to pay the outstanding amounts then prior to forfeiture, (whether by peaceable re-entry which is the right of the freeholder to terminate a lease by taking physical possession of the premises or whether by court proceedings) the freeholder is required to serve a notice under s146 of the Law of Property Act 1925 (restrictions on and relief against forfeiture of leases and under-leases) specifying the following:
- The breach complained of;
- The requirement for it to be remedied (if capable);
- The amount of compensation to be paid under ss1 of s146 (c) of the Law of Property Act 1925 The words ‘by action or otherwise’ means that it extends to where the freeholder gains peaceable re-entry but void if the subsection is not complied with and the term ‘in any case’ relating to compensation to be payable by the leaseholder means that the freeholder does not need to ask for it if he doesn’t want it.
The Notice can only be served after 14 days from the final determination and must also be served on anyone else with an interest in the property. This is because forfeiture of a lease involves the destruction of all rights that feed off it, so sub-lessees, mortgagees, assignees and occupiers all stand to lose their interests in the premises.
When a Notice is Not Required
However, where the lease reserves the service charge as rent and provides that it is recoverable as rent, there is no need to serve a section 146 notice as a precursor to forfeiture proceedings in the event of non-payment. Such service charges nevertheless fall within the statutory definition of “service charges” under s18(1) of the Landlord and Tenant Act 1985 and are therefore subject to statutory protection. Consequently, forfeiture of the lease for a non payment of service charges reserved as rent is subject to restrictions on forfeiture that are imposed by s81 of the Housing Act 1996. These largely mirror the requirements of s168 of the 2002 Act. This same section also contains provisions allowing recovery of the landlords costs, specifically ‘a lessor shall be entitled to recover as a debt due to him from a lessee, and in addition to damages (if any), all reasonable costs and expenses properly incurred by the lessor in the employment of a solicitor and surveyor or valuer, or otherwise, in reference to any breach giving rise to a right of re-entry or forfeiture which, at the request of the lessee, is waived by the lessor, or from which the lessee is relieved, under the provisions of this Act’.
The freeholder must allow a reasonable period of time (usually 3 months) for compliance and if the breach is remedied then forfeiture is not applicable. If the breach is not remedied within a reasonable time the court has the discretion to grant relief to allow yet more time for remedy, provided the leaseholder has applied for it. Even if it is granted then the freeholder can continue to go ahead with enforcing forfeiture at any time before possession has actually been taken.
Affected parties can also apply for relief against forfeiture and the Court has a broad power to grant it. Typically, a sub-tenant will have to make good his landlord’s defaults and to enter into a new lease with the head landlord that contains the same duties as his landlord owed: this can often involve taking on new rent and repairing duties if the sub-tenant wishes to remain in the premises.
Having said that, the freeholder will usually seek an order that they are entitled to vacant possession of the property because where the property is lawfully occupied as a dwelling, the premises cannot be re-entered without a court order under the Protection from Eviction Act 1977, applicable to both owner-occupiers and subtenants.
If the tenant either fails to remedy the breach (if remediable) or compensate the landlord within a reasonable period of time then with regards to occupied residential property, the freeholder must enter under court proceedings in order not to breach s2 of the Protection from Eviction Act 1977 (restriction on re-entry without due process of law).