Legal Guide
Forfeiture: Can a Freeholder Take Back Your Flat?
Forfeiture is the freeholder's right to terminate a lease and repossess the flat for a serious breach. In practice it is rare, but the threat of forfeiture proceedings can affect a sale. This guide explains how the process works and what protections leaseholders have.
Forfeiture in Plain English
A leasehold is a contractual arrangement: the leaseholder pays ground rent (on older leases), service charges, and complies with the covenants in the lease in exchange for the right to occupy the flat for the term. If the leaseholder seriously breaches those obligations, the lease gives the freeholder the right to forfeit the lease, which means terminating it and repossessing the flat.
The word forfeiture comes from the idea that the leaseholder forfeits (loses) their interest in the property. The practical consequence is severe: the leaseholder loses all of the equity they have built up over years or decades of ownership, not just the amount of the debt that triggered the proceedings. A leaseholder with a flat worth £400,000 and ground rent arrears of £500 could, in theory, lose everything.
Partly for this reason, the law surrounds forfeiture with significant procedural protections for leaseholders, and courts exercise their discretion to prevent forfeiture where the breach can be remedied and the leaseholder acts promptly. Completed forfeitures of residential flats are rare. But threatened or actual forfeiture proceedings are not, and they have real practical consequences, particularly for anyone trying to sell.
What Can Trigger Forfeiture Proceedings
The right to forfeit must be set out in the lease. 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. Non-payment is a breach of the rent covenant. The Commonhold and Leasehold Reform Act 2002 introduced a threshold: the freeholder cannot begin forfeiture proceedings for ground rent arrears unless the amount outstanding exceeds £350 or has been outstanding for more than three years. The freeholder must also have served a formal demand for payment before commencing proceedings. For leases granted from 30 June 2022 onwards, ground rent is set to zero by statute, so this trigger cannot arise on new leases.
Service charge arrears
Service charges (the annual costs of maintaining the building, insuring it, and providing communal services) must be paid under the lease. Before a freeholder can forfeit for service charge arrears, the amount must first be determined to be due, either by the leaseholder agreeing to pay it, by a County Court judgment, or by a First-tier Tribunal determination. A disputed service charge cannot be used as the basis for forfeiture until it has been formally determined.
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.
The Legal Process
Forfeiture does not happen immediately when a breach occurs. There is a formal procedural path the freeholder must follow, and at each stage the leaseholder has the opportunity to remedy the situation.
The section 146 notice
For breaches of covenant other than non-payment of rent, the freeholder must first serve a section 146 notice (under section 146 of the Law of Property Act 1925) before they can begin forfeiture proceedings. The notice must identify the breach, require it to be remedied if it is capable of remedy, and require the leaseholder to pay reasonable compensation. The leaseholder must then be given a reasonable period of time to comply. Only if they fail to do so can the freeholder proceed.
For service charge arrears, there is an additional step: the freeholder must first obtain a court judgment or tribunal determination that the charges are due before serving the section 146 notice. This means a disputed service charge cannot be the basis of a forfeiture notice until it has been formally resolved.
County Court proceedings
If the leaseholder does not remedy the breach after a valid section 146 notice, the freeholder can issue proceedings in the County Court for forfeiture. The court does not automatically grant forfeiture: the leaseholder has the right to apply for relief (see below), and the court will usually give the leaseholder the opportunity to pay any outstanding sums and remedy the breach before making any order.
Peaceable re-entry
There is a second route to forfeiture without court proceedings, called peaceable re-entry: the freeholder physically re-enters the property and changes the locks. This is technically lawful in some circumstances for commercial property, but for residential leasehold flats it is generally considered to amount to unlawful eviction under the Protection from Eviction Act 1977, and freeholders who attempt it face serious legal consequences. In practice, residential forfeiture always goes through the courts.
Relief from Forfeiture
Relief from forfeiture is the leaseholder's most important protection. It is a court order that restores the lease even though a forfeiture has been established. The County Court has a broad discretion to grant relief, and in residential cases it almost always does so where the leaseholder takes appropriate action.
How the leaseholder applies
Once forfeiture proceedings have been issued, the leaseholder can apply to the same court for relief. The court will typically grant relief on terms: the leaseholder pays all outstanding arrears, costs, and any other sums due, within a specified period. If the leaseholder complies, the lease is restored and continues as if the forfeiture had not occurred. The leaseholder does not need to show any particular reason for the default, though a history of repeated defaults over a long period may affect the court's willingness to grant relief.
The mortgage lender's right to apply
Any registered mortgagee (the leaseholder's mortgage lender) also has an independent right to apply for relief from forfeiture. This is separate from the leaseholder's own application and provides a further safety net. If the leaseholder does not respond to the proceedings, the lender typically steps in, pays the arrears, and applies for relief to protect its security. This is one reason why freeholders are required to notify registered mortgagees of forfeiture proceedings, which in turn is why the Notice of Charge on a mortgaged leasehold is so important.
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. Taking legal advice as soon as forfeiture proceedings are received is essential.
How Forfeiture Risk Affects Selling Your Flat
For most leaseholders who are up to date with their ground rent and service charges and are not in breach of any covenants, forfeiture is not a live concern. But for those who have fallen into arrears or have received correspondence from the freeholder about a breach, the impact on a potential sale can be significant.
Disclosure requirements
The TA7 leasehold information form asks sellers to disclose disputes with the landlord, managing agent or neighbours, and any notices received under the lease. A section 146 notice or any other formal correspondence about a breach must be disclosed. Non-disclosure is a misrepresentation risk, and the buyer's solicitors will in any case ask for copies of all correspondence with the freeholder as part of their due diligence.
Impact on mortgage availability
Mortgage lenders will not lend on a flat where there are active forfeiture proceedings. Even where the proceedings have been resolved through relief, some lenders will require confirmation from the freeholder that the breach has been remedied and the matter is closed. A flat with a recent forfeiture history can be harder to mortgage until a clean period has elapsed and the leaseholder can show full compliance with the lease.
Selling with unresolved forfeiture risk
Where a leaseholder is in breach of the lease and forfeiture proceedings are a real possibility, the priority should be to resolve the breach before attempting to sell. Paying arrears, obtaining retrospective consent for any unlicensed alterations, or otherwise remedying the covenant breach removes the risk. A sale attempted while a breach is outstanding will be difficult to complete with a buyer relying on mortgage finance.
Cash buyers who are experienced with leasehold complications are better placed to assess and price in forfeiture risk than buyers relying on a mortgage. Where arrears are modest and the breach is remediable, a cash buyer may proceed where a mortgaged buyer cannot. Where the situation is more serious, obtaining legal advice and resolving the breach first is almost always the better course.
Related Reading
The legal hub covers the wider legal side of selling a leasehold flat. The LPE1 guide explains the leasehold management pack where disputes and notices are disclosed to buyers.
Frequently Asked Questions
Forfeiture is the legal process by which a freeholder can terminate a leasehold and repossess the flat. It is triggered by a breach of the lease, typically non-payment of ground rent or service charges, or a breach of a lease covenant. The leaseholder loses their interest in the property, which makes it a very serious remedy. The law provides significant protections for leaseholders, including the right to apply to the court for relief (an order restoring the lease), and completed forfeitures of residential flats are rare in practice.
The most common triggers are arrears of ground rent or service charges. Forfeiture can also be triggered by breaches of lease covenants: subletting without consent, carrying out alterations without a licence, using the flat for a prohibited purpose, or causing persistent nuisance. Most leases include a forfeiture clause but the freeholder must follow a formal procedural path before proceedings can begin, including serving the relevant notices and, for service charge disputes, obtaining a court or tribunal determination that the charges are due.
For leases granted on or after 30 June 2022, ground rent is set to zero by statute, so ground rent arrears cannot arise on new leases. For older leases where ground rent is still charged, the freeholder can only pursue forfeiture for non-payment if the arrears exceed £350 or have been outstanding for more than three years. The freeholder must also have served a formal demand for payment. These protections were introduced by the Commonhold and Leasehold Reform Act 2002.
A section 146 notice is a formal written notice the freeholder must serve before beginning forfeiture proceedings for a breach of covenant (other than non-payment of rent). Named after section 146 of the Law of Property Act 1925, it must specify the breach, require the leaseholder to remedy it if capable of remedy, and require compensation for any loss. The leaseholder must be given a reasonable time to comply before the freeholder can take further action. If you receive a section 146 notice, taking legal advice immediately is essential.
Relief from forfeiture is a court order that restores the lease even after a forfeiture has been established. When a freeholder commences forfeiture proceedings, the leaseholder can apply to the County Court for relief, typically on terms that all outstanding sums and costs are paid within a specified period. Courts grant relief in most residential cases where the leaseholder acts promptly and the breach is remedied. Relief means the lease continues exactly as before, as if the forfeiture proceedings had not been brought.
Your mortgage lender has its own independent right to apply for relief from forfeiture and to pay any outstanding arrears to protect its security. Freeholders are required to notify any registered mortgagee before completing a forfeiture, which is why the Notice of Charge served at the time of the mortgage is important. In practice, lenders almost always intervene to protect their security where forfeiture proceedings are started. If you have no mortgage, there is no automatic notification to a third party, so responding promptly to any forfeiture-related correspondence yourself is critical.
Active forfeiture proceedings must be disclosed to any buyer and will prevent most mortgage lenders from lending on the property. A sale during active proceedings is very difficult unless the buyer is a cash buyer prepared to proceed with the legal risk. The priority in this situation is almost always to seek relief from forfeiture and resolve the underlying breach before attempting a sale. Taking specialist leasehold legal advice immediately is essential.
Actual completed forfeitures of residential leasehold flats are rare. The procedural requirements, the right to apply for relief, and the courts' general approach to residential property mean that most proceedings end in the lease being restored. The greater practical concern is not losing the flat but having forfeiture proceedings started, disclosed during a sale, and causing the sale to stall while the proceedings are resolved. Clearing arrears promptly and seeking legal advice at the first sign of threatened forfeiture is the right approach.