Forfeiture: Can a Freeholder Take Back Your Flat?

What Can Trigger Forfeiture Proceedings

The right to forfeit must be set out in the lease. A landlord can only pursue forfeiture where the lease contains an appropriate forfeiture or re-entry clause and the conduct complained of amounts to a breach covered by that clause, so the wording of the individual lease must always be checked. Most residential leases include a forfeiture clause that allows the freeholder to re-enter the property if the leaseholder fails to pay rent or service charges, or breaches any of the other lease covenants. The most common triggers in practice are the following.

Ground rent arrears

For leases granted before 30 June 2022, ground rent is often payable annually or quarterly, and non-payment is a breach of the rent covenant. But ground rent does not normally become payable unless the landlord has served a valid notice under section 166 of the Commonhold and Leasehold Reform Act 2002: the notice must be in the prescribed form and give the leaseholder the required period to pay, so an ordinary invoice or informal request may not be enough. The same Act also restricts forfeiture for small or recent debts. A landlord cannot normally forfeit for unpaid ground rent, service charges or administration charges unless the total exceeds £350, or some part has been outstanding for more than three years. The £350 can combine all three types of charge, and a landlord cannot avoid the restriction by treating each separately. Even where the total is £350 or less, forfeiture may still be available if part of the debt is more than three years old.

For most qualifying new leases granted on or after 30 June 2022, the Leasehold Reform (Ground Rent) Act 2022 restricts ground rent to a peppercorn, which has no financial value; the restriction applied to qualifying retirement housing leases from 1 April 2023. There are limited exceptions, including certain business, community-housing and home-finance leases, and some voluntary lease extensions may keep the existing ground rent until the original term of the lease expires. The date of the lease alone does not always determine whether ground rent can lawfully be charged.

Service charge arrears

Service charges (the annual costs of maintaining the building, insuring it, and providing communal services) must be paid under the lease. A landlord cannot normally pursue forfeiture for unpaid service charges or administration charges unless the amount has been admitted by the leaseholder or finally determined by a court, the appropriate tribunal or a qualifying arbitration process. Once the amount has been determined, the landlord must also allow the statutory 14-day period to expire before taking forfeiture action, including serving a section 146 notice. The £350 and three-year restriction above applies here too.

Breach of a lease covenant

Subletting without consent where the lease requires it, carrying out alterations without a licence to alter, keeping a pet where prohibited, using the flat for a business where residential use only is permitted or causing persistent nuisance to neighbours can all amount to breaches of lease covenants that could theoretically support forfeiture proceedings. In practice, freeholders rarely pursue forfeiture for minor covenant breaches unless there is a persistent pattern of non-compliance or a serious ongoing breach.

A landlord can also lose, or waive, the right to forfeit for a particular breach by acting in a way that treats the lease as continuing after becoming aware of the breach, such as demanding or accepting later rent. Waiver is legally complex and turns on the landlord's knowledge and conduct.

Relief from Forfeiture

Relief from forfeiture is the leaseholder's most important protection. It is a court order that can restore or preserve the lease even though a forfeiture has been established, usually on conditions such as remedying the breach, paying the arrears and paying the landlord's reasonable legal costs. The County Court has a broad discretion. Courts frequently grant relief where the breach is remedied and the leaseholder acts promptly, but relief is discretionary and should never be assumed.

How the leaseholder applies

Once forfeiture proceedings have been issued, the leaseholder can apply to the same court for relief. The court will often grant relief on terms: the leaseholder pays the outstanding arrears, costs, and any other sums due, within a specified period, and if they comply the lease is restored and continues as if the forfeiture had not occurred. In deciding, the court may consider the circumstances of the breach, whether it has been remedied, the conduct of both parties, the effect of forfeiture and how promptly the leaseholder applied for relief.

Special procedural rules can apply where the proceedings are based on non-payment of rent. In some cases, paying the full arrears and costs before the court hearing can bring the proceedings to an end. If a possession order is made, the leaseholder may still be given a period in which to pay, and a leaseholder may sometimes apply for relief even after the landlord has recovered possession, although strict time limits can apply. None of this is automatic: the procedure depends on the type of proceedings and the circumstances, so urgent legal advice should be taken.

The amount required to resolve a forfeiture dispute may be more than the original debt. The leaseholder may also have to pay interest, administration charges and the landlord's reasonable legal costs, subject to the lease and any applicable statutory controls. Those costs and charges may themselves be open to challenge before a court or tribunal.

The mortgage lender's right to apply

A mortgage lender may also be entitled to apply for relief from forfeiture to protect its security, separately from the leaseholder's own application. Many modern leases contain a mortgagee protection clause requiring the landlord to notify the leaseholder's lender before taking forfeiture action, although this may depend on the landlord having previously received formal notice of the lender's charge, and the precise requirements depend on the wording of the lease and the circumstances (which is why the Notice of Charge on a mortgaged leasehold matters). A lender may decide to intervene where forfeiture threatens its security: it might pay the arrears, fund an application for relief or require the leaseholder to resolve the breach. A lender is not required to intervene in every case, so intervention should not be assumed.

Time limits for applying

Applications for relief must be made within a reasonable time. Where forfeiture has been completed by a court order, there are strict time limits for applying. For residential property, the courts have historically been prepared to hear applications even after some delay if the circumstances justify it, but leaseholders should not assume that late applications will automatically succeed. Anyone who receives a breach notice, section 146 notice, tribunal application or possession claim should obtain specialist legal advice immediately: deadlines can be short, and delay can make it harder or more expensive to protect the lease. A landlord considering forfeiture should equally take specialist advice before serving notices or taking possession proceedings, as serving an invalid notice, failing to obtain the required determination or attempting unlawful re-entry can cause the claim to fail and expose the landlord to legal costs or other claims.