Newsflash: Court of Appeal’s strict approach flags lease forfeiture risks for landlords and tenants

27th March 2019

Housing Management & Litigation Partner Karl Anders explains a Court of Appeal case which highlights lease forfeiture risks of which landlords, tenants, lenders and LPA Receivers should be aware.

Why is this case important?

The Court of Appeal has confirmed that the law of forfeiture is strict and must be complied with absolutely if a landlord is to be able to recover possession for non-payment of ground rent and/or other amounts due under the lease (such as service charge or insurance), which are stated by the lease to be recoverable as rent.

Golding v Martin

In this case [1] Ms Martin had purchased a leasehold flat for a premium.  As is relatively common, the lease reserved service charges as rent.  Ms Martin moved out of the flat and, after some years, Mr Golding, the landlord, obtained a money judgment for over £11,000 in respect of service charge arrears.  Mr Golding then commenced forfeiture proceedings and obtained a possession order at the initial hearing.  However, the order did not comply with section 138 (3) of the County Courts Act 1984 (CCA) as it did not specify a date for possession of not less than four weeks after the possession hearing and it also did not contain any provision for relief from forfeiture, if the arrears and costs were paid.

When Ms Martin learned of the order, she applied to have it set aside. The case went all the way to the Court of Appeal, where Ms Martin argued that, because the order did not comply with section 138 (3) of the CCA, it was defective and should be set aside as of right.  The Court of Appeal agreed.

WM Comment

The law of forfeiture is complex and it can lead to draconian outcomes for tenants (and for lenders whose interests are secured against leasehold properties). The law has to provide a delicate balance between preserving the landlord’s right to recover possession in the event of the tenant’s default on the one hand; and protecting the a tenant from losing their leasehold interest (and potentially their home) on the other.

All relevant parties (tenants, landlords, lenders and LPA receivers [2]) should take note of the Court of Appeal’s confirmation that the statutory regime relating to the grant of relief from forfeiture under sections 138 and 139 of the CCA must be complied with absolutely, if a landlord is to be able to recover possession for non-payment of rent (or other sums stated to be recoverable as rent by the respective lease).

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[1] [2019] EWCA Civ 446
[2] See our earlier briefing for additional information and advice on leasehold issues for lenders and LPA receivers