Waiving the right to forfeit and the 18 month rule

As we all know, when a leaseholder breaches a covenant under the Lease, usually a covenant relating to the payment of ground rent or service charge, the ultimate sanction held by the Landlord and/or the management company is that of forfeiture. For that reason it is critical that, while debt recovery proceedings are taking place, no steps are taken which could waive the right to forfeit.

Potentially, anything which takes place after the breach arises which indicates that there is a continuing lease could waive the right to forfeit and, for that reason, it is usual practice for managing agents to withhold rent and service charge demands, accounts and statements during the recovery process.

While this is the safest course of action there is a potential pitfall where the leaseholder raises issues or a defence which lead to lengthy court or tribunal proceedings as there is a risk in such circumstances that, by the time the recovery process finally ends, it is too late to raise service charge invoices as they would include expenses more than 18 months previously, and would infringe S20B of the Landlord and Tenant Act 1985, unless actual notice of the sums due had been given during that 18-month period.

...

While it is always advisable to withhold all demands as soon as a ground for forfeiture arises, it can be appreciated that this causes difficulties in such cases. For that reason it can be suggested that, during the period in which demands are being withheld, managing agents write to the leaseholder in breach as follows:

“Your lease is being treated as forfeit due to arrears of service charge which fell due on [ ]. As we regard the lease as at an end we do not wish, at this time, to make demand for payment of any sums which would have fallen due after that date if the lease was still in existence. However, in view of the statutory controls of service charge, we wish to give you notice of certain amounts which will be demanded of you in the event that a court or tribunal treats your lease as not having been forfeited (whether by reason of relief from forfeiture or for any other reason). In that event, and only in that event, the amounts in question are as follows:......”

This would have the effect of giving the leaseholder actual notice of the sums for which he may, eventually, become liable, while also minimising the risk that such notification amounts to a waiver of the right to forfeit.

While such approach is not without risk of being treated as a waiver, this could be considered a reasonable approach to take in order to protect the right to demand service charge at a date when the recovery process has been completed.

There is, of course, a huge amount of case law as to what actions constitute a waiver and, unfortunately, no definitive position which can be adopted.

The above can be considered the safest option currently available to avoid waiving the right to forfeit while maintaining the ability to demand service charges suspended by the recovery process.

Charlotte Collins is a Solicitor at SLC Solicitors

< Back