Waiving right to forfeiture for breaches relating to non-payment of Service Charges

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

    Waiving right to forfeiture for breaches relating to non-payment of Service Charges

    Hello,

    I was wondering whether someone clued up on the law surrounding forfeiture could help shine a light on circumstances where a breach of lease has been permanently waived.

    The specific query I have is, say a leaseholder has various arrears dating back over a number of years. I think I'm correct in understanding that a freeholder could only attempt to forfeit the lease for the most recent non-payment breaches, since the issuing of any subsequent service charge demands would have waived the freeholder's right to forfeiture for any previous breaches (of a non-continuing nature).

    But, what if the freeholder issued completely new service charge demands for all previous arrears? So, it's not a reminder, but instead a fresh demand, simply containing all the items that have still not been paid and specifying an appropriate date for payment. If these new (repeat) demands (for old amounts) remained unpaid again, could this be considered a fresh breach for the purposes of forfeiture proceedings?

    Many thanks!

    #2
    I do not understand why the service charge demands were reissued. Were the original demands defective? Was a notice of tenants rights and obligations included with the demands? If a freeholder only wants to propose a new date for payment, (s)he can do so without reissuing the demands.

    If the landlord wants to claim for forfeiture (s)he should obtain a court or Tribunal order confirming that there is a breach of the lease eg non payment of service charges. The landlord would then commence forfeiture proceedings during which time (s)he would not be able to claim any further ground rent or service or other charges under the terms of the lease.

    Forfeiture is a threat to persuade leaseholders to pay any outstanding charges. the chance of forfeiture is slim at best and there is a proposal to remove forfeiture clauses from leases in future.

    Comment


      #3
      Why has the defaulting lessee not been sued? Who paid their arrears -- the other lessees or was it stolen from a sinking fund paid for by others.

      I sincerely hope that you are not the defaulting party here.... because if you are (and if you have not had the service charges declared and non-chargeable under the lease by the FTT) then you are basically a thief (and the freeholder is totally unfit to manage the building).

      Comment


        #4
        Thank you for your replies eagle2 and AndrewDod.

        eagle2 - No demands have been reissued, my question was merely hypothetical. Perhaps I have not explained myself well in the opening post. I am writing as a relatively new freeholder with a leaseholder in arrears (arrears which have been building up for the last few years). We are at the point now where we must use legal means to compel the leaseholder to pay what they owe. Non-payment of service charges are not the only breach. There is now a long sorry list of other breaches that also need to be addressed. My biggest concern at this point is whether we can recover our legal fees for obtaining a determination from a court/tribunal. The issues, as I say, are multiple and complex, so I do think legal representation will be necessary here to help us fight our case.

        Based on what I have read on the forum, we can only recover our legal fees, via the forfeiture clause in the lease, where the right has not been waived by some act on the freeholder's part, ie. like sending demands and receiving payment from the leaseholder. Since there are years' worth of arrears, it is clear that we have continued to recognise the lease as existing, which I fear means we cannot recover legal fees via the forfeiture clause in the lease for non-payment of service/admin charges, as repeated waivers of our right to do this has occurred. If my understanding is incorrect, then I would be grateful for clarification. If my understanding is correct, then what I am really trying to establish is whether service charge demands, issued anew, despite being for previously demanded amounts, could create a new breach if left unpaid by the leaseholder, thereby creating an ability for us to use the contractual forfeiture clause for recovery of the freeholder's legal fees. (Obviously, I would be delighted to hear that I have not yet waived my right to forfeiture at this stage, if that is indeed the case)!

        AndrewDod - As freeholder, I am the one who has had to pay the leaseholder's arrears. He has not been sued yet because I had hoped that we could deal with things amicably, and because any legal action seems to me to be a last resort, with the potential to be highly stressful and extremely costly. We are now at a point where negotiations clearly are not going to achieve anything further. I have to disagree on the point that a freeholder is unfit to manage a building because of delays taking a defaulting leaseholder to court. We have just tried our best to sort things out without the need for litigation. I never imagined that taking leaseholders to court for breaches of contract was considered merely part of the management duties of a freeholder. If so, I think it is a sad indictment of the wider situation that such behaviour by leaseholders/tenants is so routine that litigation is now considered merely part of the duties of bloc management. Surely it is the leaseholder who is unfit, rather than the freeholder?

        Comment


          #5
          One of the main reasons for employing managing agents is to chase debtors. Non-payment is common.

          Is there a ground rent? You don't need an FTT ruling to start forfeiture for non-payment of ground rents, as as long as the total debt more than £350.

          Also, the normal way of allocating payments to debts is to allocate to the oldest debt, so, if they pay up an amount equal to this year's demand, that doesn't mean they are not in breach of covenant to pay service charges, for this year.

          Comment


            #6
            Thanks leaseholder64. Ground rent is about the only thing our leaseholder pays without dispute (though often payment comes late). So unfortunately, we cannot avoid the FTT it seems.

            The point you make in your third paragraph is an interesting one. But, what if the leaseholder specifies that a payment he is making should be used to offset the current year's arrears?

            Comment


              #7
              I am afraid that if a leaseholder is in arrears for more than a short while (perhaps a year), and you have not taken legal action to recover the debt, then there is a substantial problem. You will first need to go to FTT to determine the debt. Focus on the debt not 100s of other breaches for now. If you have obeyed the lease, and the service charges are straightforward and legitimately requested you should not need legal assistance, and costs will in any event be recoverable from the lessee in breach at County Court (if you are correct).

              Legal fees for chasing the debt are not only recoverable if you seek forfeiture, although you should do that.

              Give us an impression of what other breaches we are talking about.

              Have they provided any reason for not paying - what is that reason.

              It is hardly difficult to go to FTT to get an adjudication as to the legitimacy of service charges requested. The defaulter can either dispute or not dispute. Then when you win you take that piece of paper to the county court to sue for the arrears (the court is then only concerened with the FTT bit of paper, and the fact of non payment).

              Waiting for years of arrears to accumulate is not at all sensible.

              Per your previous threads are you behaving in a non-transparent way, like refusing to reveal all insurance details? There is absolutely no excuse for that and it is not going to help you.

              Comment


                #8
                AndrewDod - I understand what you are saying about not needing legal assistance. But from my perspective, leasehold is a minefield, and I have never gone through a tribunal/court process before. This leaseholder has, and I suspect he may have had some legal training, so I do not think we are on equal footing. I have also seen what happened to the previous freeholder, because he did not seek the guidance of a solicitor during his attempts to recover arrears from the same leaseholder. I do not want to make the same mistakes because of a lack of legal assistance. It cost the freeholder far more for not having legal assistance than if he had simply taken on a solicitor for guidance. The tribunal can only make a judgement based on the evidence and legal arguments presented to them. I do not feel that I know enough about leasehold law to present my case effectively and I do not want to end up the same way as the previous freeholder as a result of my lack of knowledge.

                Taking action for the other breaches cannot wait. If anything they are even more important than the service charge arrears. There are repeated water leaks coming from the flat which the leaseholder refuses to do anything about. Water is entering into the electrics as a result which the council has deemed a potential risk to life. The breaches involved in that issue alone are repeated failure to provide the freeholder access for inspections/carry out repairs, breaches of the leaseholder's maintenance clauses, and nuisance. There are also other maintenance breaches (perhaps of a lesser severity) and potentially sub-letting breaches. I'm not too concerned about those. If we do not sort out the water leak situation legally, then the council may get involved and serve an enforcement notice on us as freeholder.

                There are multiple reasons for failure to pay. Just off the top of my head, firstly, the leaseholder doesn't believe he should be paying on account. I have pointed out in the lease where it says that payments in advance are allowed. He just ignores that. He also believes that he needs to automatically receive all documentation relating to a service charge before he should pay it. He waits months and months before making any request for documentation, and often I am not in a position to provide it, because often I have not received invoices yet from contractors (which is expected given that SC demands are issued on account, not after costs have been incurred). There are disputes over external pipework and whether they are for him to maintain or the freeholder. My understanding is if the pipework serves only his flat, then he is solely responsible for maintenance. He doesn't agree. He thinks some items should have been recovered under the insurance. The claims have either been repudiated by the insurers, or the claims were not large enough to surpass the deductable excess, or the issue simply did not occur as a result of an insured peril. He disputes all this. He also believes that details on the insurance schedule are incorrect, so is not paying buildings insurance. I have checked with the insurers - it is all fine. He also disputes the wording used in certain invoices, believing it is different to our instructions when first commissioning the works. I have explained that the wording holds the same meaning. Leaseholder simply disagrees. So on and so forth.

                We have given the leaseholder all the insurance documentation he has requested, except for details relating to claims made by other leaseholders, which I think everyone who replied on the forum agreed was confidential information. The leaseholder has the insurance policy schedule which tells him when claims have been made, the nature of the claim, and how much was claimed. I cannot give him more than that without breaching data protection legislation. I think it is inappropriate that he is asking to see details of what other leaseholders have claimed, but he won't pay his share of the excess until he has seen everything (including emails, letters, photos, invoices, notes etc.).

                I just can't see any other clause in the lease, other than forfeiture, which would allow us to recover our legal fees for taking action against a defaulting leaseholder. If there are other ways, then I would be glad to hear it.

                Comment


                  #9
                  There is a strong lobby against threats of forfeiture on this forum, and quite a strong lobby against blanket rights to recover costs from accused leaseholders.

                  I think people are assuming that this will end up in a successful Crown Court action with costs awarded against the leaseholder, but that isn't a safe position if, like most leaseholder owned companies, you have no money to risk.

                  Comment


                    #10
                    Originally posted by cday356 View Post
                    AndrewDod - I understand what you are saying about not needing legal assistance. But from my perspective, leasehold is a minefield, and I have never gone through a tribunal/court process before.
                    If you feel that way then how do you know that the service charges you have requested are legitimate. Don't get me wrong - I have a lot of sympathy for you. But you can't have it both ways.

                    Originally posted by cday356 View Post
                    Various stuff cut out....
                    The only immediately urgent thing you mention here are the water leaks and the refusal to permit the freeholder to inspect or to rectify. Water leaks are a minefield and I would deal with that entirely separately, and ignore all the other stuff for the moment -- you want it SIMPLE not complex. You are not going to want a complex wide-ranging legal challenge done all in one.

                    This sounds like a rogue lessee but that does not alter what you need to do.

                    Originally posted by cday356 View Post
                    Various reasons given by lessee for refusal to pay
                    I hope that you are absolutely correct about the service charge mechanism imposed by the lease. If you are then it is straightforward.

                    Originally posted by cday356 View Post
                    I cannot give him more than that without breaching data protection legislation. I think it is inappropriate that he is asking to see details of what other leaseholders have claimed, but he won't pay his share of the excess until he has seen everything (including emails, letters, photos, invoices, notes etc.).
                    I am afraid you have completely lost my sympathy on this one -- and that was NOT the consensus of the other thread (that you should not be transparent). The consensus was that this is used as an excuse -- it is hardly clearcut that people paying into an insurance policy have no right to know what they are paying for and why. The Data Protection Act is of marginal relevance given that claims on a communal policy should not be due to anything private. Perhaps the lessee believes that the insurers (and lessees) have been defrauded, and perhaps he is right. What exactly do you have to hide?

                    Originally posted by cday356 View Post
                    I just can't see any other clause in the lease, other than forfeiture, which would allow us to recover our legal fees for taking action against a defaulting leaseholder. If there are other ways, then I would be glad to hear it.
                    You need to keep it SIMPLE and approach the FTT about the service charges. The lessee will be exposing himself to massive risk if he does not pay and loses. If you cannot keep it simple because you have not done your job, then you can hardly blame anyone else. Send him those insurance details NOW so that he can get proper alternative quotes if he wishes to do so.

                    It is simple -- these are the service charges requested - these are the documents and lease showing why they are legitimate. We were not paid. he should have paid. If you actually need a lawyer to do that then there is something fundamentally wrong, and you really cannot be sure you have requested them correctly at all. If you incur no costs at FTT how can it possibly "cost the freeholder far more for not having legal assistance than if he had simply taken on a solicitor for guidance".

                    County court costs are awarded to the party that wins the case - it has nothing to do with the lease. So at that stage I would engage expensive solicitors.

                    If you are worried about taking it to FTT because your insurance dealings will be revealed -- then I give up.


                    Comment


                      #11
                      Is the most recent service charge payment overdue? If so, I think you may be able to start forfeiture, including refusing to accept attempts to pay just that instalment,

                      The water leak is a continuing breach, so any past waiver will have been reset.

                      Have you kept the council in the loop on the water leak. They might be able to to name the leaseholder in any enforcement notice.

                      You should be able to address all the issues for one set of FTT fees. If the FTT thinks the fine details of the insurance claims are valid, they can override data protection.

                      Does the leaseholder have a mortgage. Most lenders will add the service charge to the loan at the slightest hint of forfeiture.

                      The block insurers need to be told about the water leak.

                      Comment


                        #12
                        I'm not convinced there was a single consensus on the other thread.

                        However, the excess should not be being charged to the service charge unless it is paying for damage to things that the freeholder maintains. Paying the excess is not included in a duty to insure. Any duty to pay the excess comes from a duty to make that payment even if there were no insurance.

                        Comment


                          #13
                          Just to help us out here OP -- can you give a couple of clear examples of insurance events or details where you think it would have been legitimate to claim on the buildings policy, but where those details are so private that they are protected under the terms if the Data Protection Act against enquiry by co-insured parties.

                          Comment


                            #14
                            From the other thread, they are asking for all the correspondence, not just the information that would be in the claims summary. The freeholder wouldn't even normally have all that, as the insurer would normally be communicating directly to the people involved.

                            However, I would suggest that anything that suggests another leaseholder did anything fraudulent would certainly be protected. Remember that building insurance tends to include surface finishes, even though they tend to be leaseholder responsibilities.

                            Also the most common building claim is for escape of water, and the details might reveal information the flat of origin, possibly something about the health of the occupier.

                            There may be photographs of the inside of the flat.

                            Comment


                              #15
                              Hi leaseholder64, thank you for all your comments. The most recent service charge payment is not yet due. But, it is guaranteed that the leaseholder will not pay it because he will want invoices to be provided first, which I will not have for a few months yet since demands are being made on account. I am indeed anticipating that any dispute over these amounts could potentially be reclaimed through forfeiture proceedings.

                              But, the vast majority of the arrears were due previously. I am considering the possibility that any legal fees incurred in ascertaining liability for those historic arrears as well may not be recoverable because they relate to amounts that cannot be recovered through forfeiture. I am wondering whether a tribunal/court might exclude the repayment of some legal fees on a proportionate basis based on the fact that some fees were incurred in relation to arrears that could not give rise to valid forfeiture action. That was the reason for my initial post.

                              Yes, the council is being kept up to date on events, and the Health and Safety inspector is checking in with us from time to time. They have said that they could only name the leaseholder on any enforcement notice once we have gone through the courts to get a court order against the leaseholder. If he still refuses to remedy the situation after that, then the council can serve notice on the leaseholder rather than on us. So we must take this step first.

                              If the FTT/county court wants to see the fine details of any insurance claims, and thinks that it is relevant to their determination, then I am fully aware that the DPA would not apply and that would not be a problem at all.

                              We will attempt to approach the mortgage lenders. It is unlikely they will pay out I think, because the leaseholder will persuade them that the payments are not due, but I will try.

                              The insurers are fully aware of the water leaks.

                              Comment

                              Latest Activity

                              Collapse

                              Working...
                              X