THE COMMONHOLD AND LEASEHOLD REFORM BILL

FACT SHEET No 7 – GROUND RENT & FORFEITURE

GROUND RENT

Most long residential leases require ground rent to be paid on a particular day whether or not the landlord demands payment. There is evidence that a number of landlords do not bother to ask for payment and then, when leaseholders forget to pay by the due date, demand additional charges. These are often described as administration charges in connection with processing or pursuing the late payment. The sums demanded (typically £100 to £200) are usually wholly disproportionate to the cost of sending a reminder letter, but not sufficiently high that leaseholders are willing to challenge the landlord in court. Reminder letters frequently threaten further additional costs and the prospects of legal proceedings if the charge and outstanding ground rent are not paid.

THE COMMONHOLD AND LEASEHOLD REFORM BILL WILL PROVIDE:

That a leaseholder should only be liable for any ground rent payable under his or her lease where he or she has received a written demand from the landlord for the money; 

That the landlord would be prohibited by law from making any additional charge in respect of the rent if the rent is paid within 30 days of it being demanded;

That the landlord would also be prevented from starting forfeiture action (i.e. to re-enter and take possession of the property) for non-payment of ground rent unless a demand had been made, and at least 30 days had elapsed since the money was demanded.

FORFEITURE

In practice, forfeiture rarely occurs.  Existing legislation provides a range of measures to protect leaseholders.  Where property is lawfully occupied as a dwelling, the landlord cannot re-enter the premises without a court order. A landlord is required to serve a notice before exercising the right to forfeit the lease.  This must specify the breach and give the leaseholder the opportunity to remedy the breach or to compensate the landlord for the effects of the breach. In addition, the landlord is prevented from taking forfeiture action in respect of the non-payment of service charges unless the charge has been either agreed or admitted by the leaseholder or determined by a court or by arbitration. There are also a number of opportunities during the legal proceedings for the leaseholder to put the matters right and avoid forfeiture of the lease. 

However, unscrupulous landlords have still been able to exploit leaseholders' fears about the costs of legal proceedings and the prospect of losing their homes in order to secure payment of unreasonable charges, often in relation to minor or non-existent breaches of covenants. Formal notices of intended forfeiture proceedings are often phrased in intimidating terms.

THE COMMONHOLD AND LEASEHOLD REFORM BILL WILL: -

Introduce new restrictions on the commencement of forfeiture proceedings, including the service of notices under section 146 of the Law of Property Act 1925. Landlords would only be able to take action when a court or Leasehold Valuation Tribunal has determined that a breach of a covenant or condition of a lease has occurred.   This will address the problem of landlords who threaten forfeiture proceedings on spurious grounds in order to persuade leaseholders to pay unreasonable charges.