Returning Ground Rent

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    Returning Ground Rent

    We (freeholders) made an application to court to determine a lease is in breach - currently waiting for a hearing date. In the meantime, the defendant sent us a cheque for ground rent which was not demanded. We intend to return the cheque but we are not sure what we should say in the covering letter. We are keen not to waive forfeiture rights as case is likely to involve issuing a Section 146 notice and, with luck, issues resolved without further action.

    On the same topic comments appreciated if ground rent is paid electronically. The difficulty with this is while leaseholders have our bank details we do not have their account details to return using the same method.

    I would be grateful for advice.

    Thank you.

    #2
    I think that you are entitled to retain a cheque, but you should not pay it into the bank until the dispute is settled. If you receive monies directly, you should refund the amount eg by cheque. You should be able to deduct any reasonable costs involved eg bank charges. Your covering letter should simply say " we regret that we are unable to accept payment of ground rent whilst the current proceedings are ongoing".

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      #3
      Thank you eagle2 - your comments were helpful.

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        #4
        For the purposes of this thread, receipt of a cheque is the same thing as receiving cash. If someone pays by cheque the date of payment cannot be the date when the recipient decides to bank the cheque or the cheque is cleared. Send back the cheque.

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          #5
          Dear Lawcruncher, Thank you. Do I need to include a covering letter and, if so, what should I include in the content? I am also not sure how I evidence I returned the cheque.
          Any further comments appreciated.

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            #6
            I have experience recently of a solicitor who threatened forfeiture proceedings against a leaseholder, who then paid ground rent by cheque. The solicitors informed the leaseholder “your cheque …. will be held on account whilst we await payment of the remaining £xxx” and the cheque was not banked.

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              #7
              Originally posted by vmart View Post
              Dear Lawcruncher, Thank you. Do I need to include a covering letter and, if so, what should I include in the content? I am also not sure how I evidence I returned the cheque.
              Any further comments appreciated.
              To be honest I am not sure what you need to say, if anything. I think the main thing is to send the cheque back. I suggest posting your query here where litigators hang out: http://swarblaw.co.uk/viewforum.php?f=7

              I am not sure you really need to be worrying too much about waiving the right to foreit as with residential long leases it is a nuclear option rarely encountered in practice.

              Demanding or accepting rent is not the only way you can waive the right to forfeit. You must not do anything which is inconistent with an intention to forfeit.

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                #8
                Dear all
                Thank you for your time and comments. I will post a query with swarblaw - thank you for signposting this site.

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                  #9
                  Originally posted by eagle2 View Post
                  I have experience recently of a solicitor who threatened forfeiture proceedings against a leaseholder, who then paid ground rent by cheque. The solicitors informed the leaseholder “your cheque …. will be held on account whilst we await payment of the remaining £xxx” and the cheque was not banked.
                  I do not think that that works. A cheque involves an unconditional order to pay and is treated as if it is cash. If you accept a cheque you are deemed to have been paid the amount ordered to be paid subject only to the cheque being cleared. If the cheque bounces there is a rewind and you are deemed not to have been paid. You can also sue on the cheque rather than on the debt, which is handy as there is no defence other than fraud, though a counterclaim is not ruled out. You can of course argue about whether a cheque has been accepted, but if you say you are keeping it to bank later I do not see how you can argue you have not accepted it.

                  I expect this is a case where legal and administrative fees have been demanded. They and the ground rent are separate accounts. Absent any agreement to the contrary, it is for the debtor to choose which account any payment is to be credited to. So, if a leaseholder presented with a demand for payment of ground rent and charges sends a cheque for the amount of the ground rent and specifies it is for the ground rent, then, if the cheque is accepted the ground rent is paid. It is not possible to impose a condition that all the accounts must be paid. You cannot go to court to prove a debt if you have an unbanked cheque tendered in settlement in your drawer.

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                    #10
                    Thanks Lawcruncher, that is useful information and you are correct the bulk of the claim consisted of legal fees and .administration charges to which the leaseholder objected.

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                      #11
                      Yes, Lawcruncher, thank you. Your points are generally useful/interesting not just in relation to leasehold matters.

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                        #12
                        Yes it would be useful to know what the alleged breach is.. it maybe something we see a lot of here where LH is late paying GR but FH adds on further n further admin charges (often where lease doesn't allow it anyway). The LH has a right to send cheques for GR or admin charges or service charges as they are all separate entities...it can be a very complex legal issue and more often than not the FH gets it wrong.

                        it's not quire as complex if the breach is non monetary i.e keeping pets, sub letting etc
                        Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

                        I do not accept any liability to you in relation to the advice given.

                        It is always recommended you seek further advice from a solicitor or legal expert.

                        Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

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                          #13
                          Just an update on the point raised at #6, I have been informed that the cheque for ground rent has been presented to the bank. Presumably the freeholder was hoping that it would not be cleared. I have recommended that the leaseholder requests an updated statement of account to see whether or not the administration charges and legal fees have been removed from his account. The solicitors involved are well known to this forum and are experienced in attempting to collect ground rents and other charges.

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