Forfeiture clause in leasehold agreement

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    Forfeiture clause in leasehold agreement

    Hi,

    I'm planning to buy a new built leasehold property with remaining lease of 125 years. Everything seemed fine unless I went through the leasehold agreement in detail. It had a clause which says that "The Landlord may re-enter the Property (or any part of the Property in the name of the whole) at any time after any of the following occurs (a)any Rent, Insurance Rent, Service Charge or any other rent due under this lease is wholly or partly unpaid 21 days after becoming payable;(b)any breach of any of the Tenant Covenants.
    If the Landlord re-enters the Property (or any part of the Property in the name of the whole) pursuant to this clause, this lease shall immediately end, but without prejudice to any right or remedy of the Landlord in respect of any breach of covenant by the Tenant" There is another clause which says "Section 8 of the Housing Act 1988 will not apply if the Rent falls into arrears". This sounded a bit alarming to me as it seems I can lose a lease worth hundreds of thousands just based on arrears of a couple of hundred of pounds for 3 weeks!! My lawyer says that it is a standard clause. Am I over reacting here it is something really as alarming as it sounds?

    #2
    Sounds fairly standard.

    Statute moderates what can actually be done: they can't forfeit if less than £350 is owed for less than four years. They can't forfeit for other covenant breaches unless the FFT rules there has been a breach. They must give notice and you can apply for relief from forfeiture. That relief will normally be granted, unless you stick your head in the sand. The relief is likely to have conditions, e.g. you pay the arrears or sell up within a time limit.

    Comment


      #3
      Thanks. Does the waiving of section 8 of the housing act 1988, any way restrict my rights and make it easier for the landlord to go ahead with forfeiture?

      Comment


        #4
        You should ask the CMA ( Competition and Markets Authority ) to declare the lease contains "unfair contract terms" which seeks to exclude statutory rights for the property buyer .

        The buildings insurance is treated as a service charge expense under the Landlord & Tenant Act 1985 and cannot be charged as "rent insurance".

        Under the terms of a 125 years lease , the Lessor has rights to enter the demised leasehold property for maintenance , tracing water leaks and for making repair but such that does not give the right to terminate or forfeit the lease.

        This right to "re-enter the property" and end the lease immediately is an unfair contract term for the property buyer. You should make a complaint to the SRA against the solicitor for offering such lease on "unfair terms" in 2019.

        Comment


          #5
          Originally posted by Gordon999 View Post
          You should ask the CMA ( Competition and Markets Authority ) to declare the lease contains "unfair contract terms" which seeks to exclude statutory rights for the property buyer.
          Right now since I have't signed on the dotted line, I have a simpler option to just walk away. The seller's solicitors are insisting that this clause is non negotiable as they have already sold many flat with same clause in the development. But in case I get into the lease, how easy or difficult would be then to get this declaration made?

          Comment


            #6
            Originally posted by Gordon999 View Post
            This right to "re-enter the property" and end the lease immediately is an unfair contract term for the property buyer. You should make a complaint to the SRA against the solicitor for offering such lease on "unfair terms" in 2019.
            Again is it better to just keep away or I would have enough leeway after entering the agreement to get this judgement in case it is required?

            Comment


              #7
              It costs little or nothing for you to send a complaint letter on" unfair contract terms" to CMA and SRA .

              If you are prepared to walk away , then making a complaint may help to stop the solicitor acting for a freeholder who is selling "unfair leases" by removing statutory rights to leaseholders.

              Comment


                #8
                I don't see anything in the lease terms that you have quoted that seem unusual or that should be a problem.

                You are highly unlikely to find a flat, especially a new build (if that's what you want) that doesn't have similar terms in the lease.


                it would be highly unusual for any lease to actually be forfeited under terms like these, they are used more as a way to put pressure on leaseholders to pay money that is owing or as a way to get legal costs paid if unpaid money has to be chased (although newer leases may also contain clauses making it easier to get costs paid).

                Comment


                  #9
                  Originally posted by Gordon999 View Post
                  It costs little or nothing for you to send a complaint letter on" unfair contract terms" to CMA and SRA .

                  If you are prepared to walk away , then making a complaint may help to stop the solicitor acting for a freeholder who is selling "unfair leases" by removing statutory rights to leaseholders.
                  I'm not convinced that the terms quoted would be considered unfair.

                  The best course of action would be to have a conveyancing solicitor look at the lease and explain what all of the clauses mean.

                  Comment


                    #10
                    Dawn 29,

                    Are you trying to buy a residential leasehold property located in UK ? Are you using a Conveyancing Solicitor who is a member of the UK Law Society ? Your use of "Lawyer" does not sound quite right for UK market .

                    Normally the wording in a residential lease will show the contract is between "Lessor" and "Lessee" plus "Management Company" if applicable .

                    The section saying " If the Landlord re-enters the property, this lease shall end immediately " should not appear in the wording for leases drafted for new residential property in 2019. ( M. says he is not convinced the terms are unfair but its not his money at risk . )

                    If you wish to proceed , you should resolve every one of your concerns before you sign the dotted line .....

                    The latest problems faced by many leaseholders are reported in UK national papers for " leasehold houses" with ground rent doubling every 10 years which escaped the attention of the conveyancing solicitor. This problem has made the houses become unsaleable and the Housing Minister is considering reducing the annual ground rent for leaseholders and has asked the CMA to investigate.

                    Comment


                      #11
                      Originally posted by Gordon999 View Post
                      Dawn 29,

                      Are you trying to buy a residential leasehold property located in UK ? Are you using a Conveyancing Solicitor who is a member of the UK Law Society ? Your use of "Lawyer" does not sound quite right for UK market .
                      .
                      I actually meant a conveyancing solicitor

                      Comment


                        #12
                        Originally posted by Gordon999 View Post

                        The section saying " If the Landlord re-enters the property, this lease shall end immediately " should not appear in the wording for leases drafted for new residential property in 2019. ( M. says he is not convinced the terms are unfair but its not his money at risk . )
                        The new-built was completed in 2018 but is being sold only now. Could that be a reason for this clause?

                        Comment


                          #13
                          Curious what are the steps that the landlord needs to follow in case the ground rent payment is delayed beyond 21days and they are looking to enforce this clause? How does invalidation of Section8 of housing act 1988 as per the leasehold impact my rights and access to remedies?

                          Comment


                            #14
                            Service charges, as legally defined, and rents are not mutually exclusive, so I don't see why you can't have an insurance rent.

                            I think the distinction is, in practice, rather subtle, but rents can only be recovered for six years, whereas non-rents can be recovered for twelve years, and there is an automatic right to forfeit for non-payment of rent (subject to the recent rules on minimum amounts owed). I suspect rents are used because failing to pay insurance put the property at immediate risk.

                            Comment


                              #15
                              The landlord cannot re-enter without a court order whatever it says in the lease so they would have to get that first, it is a standard phrase but it has been superseded by legislation. That said, it is very archaic wording and you are right to query it. That no previous buyer has done so is irrelevant, the leases can be varied. The important thing to check is the ground rent reasonableness and if it rises and by how much, that will tell you what kind of developer you're dealing with. What do they plan to do with the freehold when they are all sold?

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