Articles

Residential forfeiture: abandoning a flat with no forwarding address

5th May 2022

It has long been recognised that the law of forfeiture is draconian. In 2006, the Law Commission published a report proposing that the current law be abolished and replaced with a new statutory scheme which would circumvent the manifest injustices. Those proposals have not troubled the statute book. However, in the case of long residential leases, there are now so many statutory hoops to jump through that it is highly unlikely a leaseholder will be deprived of their lease following a breach. Unless, that is, they abandon their flat and provide no forwarding address.

The route to possession

Ultimately, if a lease is forfeited, the lease comes to an end and the landlord is entitled to possession. The lessee loses their lease, their home and their mortgagee will lose its security. But there is a long and winding road to go down before any forfeiture windfall comes into view. Many landlords will use the threat of forfeiture to encourage compliance with the terms of the lease, but the cost and time involved in reaching the ultimate destination is usually not worth the journey.

Let’s take the case of a lessee who is in arrears with their service charge obligations. The lease will typically include a forfeiture clause, which allows the landlord to re-enter the flat and terminate the lease if the service charges are unpaid for 21 days. What must the landlord do to exercise that right?

Section 2 of the Protection from Eviction Act 1977 provides that the right of forfeiture cannot be enforced otherwise than by court proceedings while any person is lawfully residing in the premises. So the landlord can’t just change the locks. Section 146 of the Law of Property Act 1925 adds that the right to forfeit will not be enforceable unless the landlord serves a warning notice on the tenant specifying the breach of covenant and requiring the tenant to remedy it. Only if the tenant fails to remedy the breach within a reasonable time will the court entertain the proceedings.

A section 146 notice is a powerful weapon, as it puts both the lease and any security secured on it at risk. To prevent unmeritorious notices being used as such a threat, further restrictions have been imposed by statute. Section 81 of the Housing Act 1996 provides that where premises are let as a dwelling the landlord cannot exercise the right of re-entry or forfeiture unless a court or tribunal has determined that the arrears of service charge are payable. In the case of other breaches (other than non-payment of rent), the landlord must first obtain a determination of breach under section 168 of the Commonhold and Leasehold Reform Act 2002. In either case, a section 146 notice cannot be served until the expiry of 14 days from the final determination, ie 14 days after the right to appeal has expired or any appeal has been concluded.

Even if the landlord manages to get the determination, await the expiry of the limbo period and serve a valid section 146 notice, that is not the end of the matter. The landlord then needs to issue possession proceedings. The tenant can, of course, seek relief from forfeiture and the whole exercise may have been for nothing. Not only will the whole process have taken many months/years but the landlord may not be able to recover their costs in full.

However, what if the leaseholder doesn’t “lawfully reside” in the dwelling, doesn’t receive the application for a determination of breach and doesn’t respond to the section 146 notice?

Dangers of leaving Geoffrey in charge

In Gibbs v Lakeside Developments Ltd [2018] EWCA Civ 2874; [2019] PLSCS 1, Carolyn Gibbs moved abroad in 1990, leaving her flat unoccupied for most of the subsequent period. She failed to pay any service charge or rent after 2007 and the landlord issued a claim for the arrears, obtained judgment in default, then issued proceedings for possession. In the absence of a defence, possession was obtained and the landlord granted a new lease to a third party. Gibbs eventually became aware of the proceedings, which it transpired had been served on the wrong address. The court accepted that Gibbs would have been entitled to have the order for possession set aside but went on to consider whether this would have served any purpose. Lewison LJ said (obiter) that, as the 1977 Act did not apply (because she was not residing in the property), the landlord didn’t need a court order anyway. The tenant was too late to apply for relief from that lawful forfeiture because the six-month time limit imposed by section 138(9A) of the County Courts Act 1984 had expired. She was too late.

A similar difficulty arose in Timbo v London Borough of Lambeth [2019] EWHC 1396 (Ch). Martha Timbo left the country leaving the management of her flat with a man known only as Geoffrey. Geoffrey failed to pay the service charge and the council obtained judgment in default for the arrears. An order for possession was obtained following undefended proceedings and possession was obtained. The tenant finally found out and applied to the High Court for relief some 14 months later. Again, she was too late and her lease was lost.

Most recently, in Golding v Martin [2022] EW Misc 2 (CC); [2022] PLSCS 17, the order for possession obtained in July 2016 had been set aside by the Court of Appeal ([2019] EWCA Civ 446; [2019] PLSCS 52) three years later because the form of the order did not comply with section 138 of the 1984 Act. A year later, the tenant applied for damages for unjust enrichment on the grounds that possession had been taken pursuant to an invalid court order.

Judge Luba QC found that the lease was validly forfeit as the landlord had not needed a court order. As he concluded, this was a “cautionary tale” that: “…a non-resident and absentee leaseholder who provides no correspondence address other than that of the property itself must either (a) make proper arrangements for forwarding or diverting the mail addressed to the premises or (b) entrust the take of ‘keeping an eye’ on their property to person who are actually committed to the task.”

By Nicola Muir

 

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