How hard can forfeiture be?

[flyingfreehold]

You have very little chance of getting a possession order because the Judge would find that the benefit to your son would be disproportionate to the debt. So forget that, its not going to happen like that. I run many blocks of flats under management and unfortunately therefore have dozens of cases similar to yours. Some leaseholders, even those who are landlords themselves will ignore all requests for payment other than mortgage repayments which is very irritating but it happens. What I suggest you do is apply for an interim charging order such that the CCJ debt appears o the lessee's title as a subsequent charge. Once you've got that then get a final charging order.

Your tenant will not be able to sell or remortgage without paying off the debt and interest will accrue at the County Court rate which is 8 which racks up to about 10% when calculated with monthly rest dates and then compounded.


Once you've got the charging order you can if you want apply for an Order for Sale which might succeed; however once youve been paid out of the proceeds you would then have to pay the balance to "next entitled" which would be the first chargee. Once they've had what's due to them they are obligated to pay the lessee if there is no other secured registered chargee. If they cant then find the lessee because they have disappeared they are obligated to seek directions from the Court; and pay such funds usually into Court.

BTW unless you can prove the sellers specifically assigned the benefit of the ground rent arrears paid over at purchase to your son they are irrecoverable.

[sgclacy]

Building on the advice of flying freehold.

A charging order for under £5,000 will not gain any interest over time

You may be better letting the arrears build up to over £5k then getting a charging order

A charging order above £5,000 attracting statutory interest currently a rather generous 8% is a long term investment which may be of interest to some. So your son could get his money back if he sold the debt

[sgclacy]

Adding to what I said earlier, it would of course in this case be a 1st charge

[pater]

Many Thanks again for your time and responses!

Jon66, I wasn't aware of UC being able to pay service charges. I read the info at the link, and I got the impression that it was aimed at short term leases, eg landlord/tenant relationship, not freeholder/leaseholder. But it's something that I can pursue with DWP this week. Neither the lessee nor the management company have mentioned this at all and she isn't claiming from UC for the service charges; I presume she should have been informed of this by CAB? Even if this comes to fruition, the problem of unpaid ground rent remains.....

flyingfreehold, you're not the first to indicate that forfeiture is not readily granted! I have had so much conflicting information on this from a number of sources that I'm left wondering what is the point of the legislation? I suppose that I'm encouraged by the judge at the last hearing; he repeatedly warned the lessee that she could be facing a successful forfeiture action from my son. Scare tactics? Do judges do that? 😆 I have already looked at the Charging Order process (so that she can't sell and do a runner), so may continue with that in tandem with the letter of claim. I had noted the 8% interest rate allowed; in her lease, arrears are currently chargeable at a daily compound rate of 4.1% - we have stated in the letter of claim that we will only charge a flat rate of 4.1% on the total debt and no admin charges - partly because it would be a nightmare to calculate! 😲. I hadn't realised that we could apply for an Order of Sale - this would be morally more acceptable to us than forfeiture. We can apply at the same County Court that gave the CCJ so this is definitely something that I will look into. I assume that once we've taken what is owed, the 'next entitled' in this case would be the lessee? There is no one else that has an interest as far as I know. Sale of her flat was something that we strongly suggested to her back in Dec 2019 as being her best course of action, and we really want to see that happen so that she isn't disadvantaged by any more than is necessary. The debt is currently around £4.7k, by March the debt will be in excess of £5k.

sglacy, your additional comments noted, thanks. My son probably isn't a typical freeholder, eg doesn't have a property portfolio and comfortable cash reserves (apart from me!), so is keen to recover this debt asap; one of the reasons that we dispensed with the solicitor was their procrastination. We appreciate that the mechanisms of the judiciary aren't the quickest, especially under Covid but nonetheless we would like to make progress.


We still intend to issue the letter of claim post lockdown unless anyone thinks that it's definitely a bad move. It does state that the letter is in contemplation of forfeiture, so may focus the lessee's attention on a genuine effort to sell. I will investigate the possibility of UC paying her service charges, although if that doesn't bear fruit there remains an ongoing issue if she remains in the flat. I'll do more reading and and commence the process of applying for a Charging Order, interim or final (not sure of the difference atm).

Once again I'm so grateful for the replies, tantamount to free legal advice! . You will have probably gathered by now that I'm going without the aid of a solicitor - I enjoy a challenge! In my experience, even if I fail the court would point out why, thereby leaving scope to try again.

Any further pearls of wisdom gratefully accepted, shame we don't have a virtual bar forum where I could buy you all a drink 🍻

[flyingfreehold]

Building on the advice of flying freehold.

A charging order for under £5,000 will not gain any interest over time

You may be better letting the arrears build up to over £5k then getting a charging order

A charging order above £5,000 attracting statutory interest currently a rather generous 8% is a long term investment which may be of interest to some. So your son could get his money back if he sold the debt

Hi Stephen I beg to differ! Our numerous final charging orders previously obtained admit that interest is due and payable irrespective of the quantum of the debt and costs racked up. Perhaps on new charging order the Court is only allowing interest where the amount owed exceeds £5,000. I am still of the view that the correct route for the OP is charging order, interim and then final and then to bring matters to a head if so required by an application for an order for sale. The benefits people would in times past have sought to come to an accommodation with you rather than have the further costs of someone else to rehouse but now I dont know if they can.

[nukecad]

I wasn't aware of UC being able to pay service charges. I read the info at the link, and I got the impression that it was aimed at short term leases, eg landlord/tenant relationship, not freeholder/leaseholder. But it's something that I can pursue with DWP this week.

That is an interesting one.

UC Housing Element can include service charges for certain things, it depends what the service charges are for.

Service charges can be paid in UC claims that don't include rent for a tenancy.
The classic example of that is a UC claimant living on a canal boat that they own and claiming UC-HE for mooring fees.

You may be able to get UC to pay you the ongoing service charges directly as an Alternative Payment Arrangement - of course the claimant would have to apply for the service charges first.
As there is no tenancy it would not be a Managed Payment to Landlord just an APA.

Regarding the debt that would be a seperate matter, but (especially as you have a court judgement) you could apply for a 3rd party deduction from her UC Standard Allowance for that debt.
However how much can be deducted from UC each month is limited, and you may not end up with much more than that £46, at least it would be being paid though.

I'd be interested to know how you get on with the DWP.
One thing to note is that they will not discuss anything about her UC claim, it's her claim and is privileged information covered by DPA 2018 (GDPR).
Even professional benefit advisers have problems getting UC to talk about their clients claims, even with the clients permission.

PS. I appreciate that in this situation it's more a question of getting her to accept her ongoing responsibilities, rather than simply recovering the arrears.

[pater]

I’ve been doing a bit more research based on advice kindly posted.

My first line of enquiry was to phone DWP regarding service charge payments as part of universal credit. The lady I spoke to had no idea what I was talking about, so she referred to her line manager; that answer came back as a categoric ‘no can do’.
So, I looked into the Universal Credit Regulations 2013……and found two references that indicated that service charges, (but not ground rent), could be paid:

UC Regulations 2013 Schedule 1 Para 7(2), and Schedule 5 Part 4 Para 13

I then emailed those references into DWP, asking how service charge application could be made…I received this reply:

If a tenant is having difficulty paying their rent, landlords can apply to request payment from a tenant’s Universal Credit. You can apply for direct rent payments using the link below:

https://directpayment.universal-credit.service.gov.uk/

So I’ve come to the conclusion that DWP staff haven’t got a clue, and suspect even if they knew and acknowledged their own regulations, that it is down to the claimant to submit this as part of their claim. I haven’t yet given up, but not holding my breath either.

There are two distinct problems facing my son:

1. Recovery of the original debt and additional amounts since he has bought the freehold.
2. Payment of ground rent and service charges going forward.

Options for 1:

1. Do nothing, write off £5k and future accrued debt.
2. Wait until the debt exceeds £5k, apply for another CCJ, followed by Interim and Final Charging Order. sgclacy was correct when he posted that interest is chargeable at 8% only on debts above £5k. The County Courts (Interest on Judgement Debts) Order 1991 and Judgements Act 1838 apply in this case.
3. Once a Charging Order is obtained, this could then be progressed to an Order for Sale (morally more acceptable than forfeiture), or potentially sold to an interested third party to provide a quick win.
4. Carry on down the path of forfeiture – this would potentially solve both of the problems with one action.

Options for 2:

1. Do nothing, continue to take the hit and fail to meet freeholder obligations.
2. Pursue DWP in the hope that I find someone who can understand the issue (service charge only).
3. Carry on with forfeiture.

Whichever course of action we pursue, we can’t really do anything until next April as we’ve already given her until the end of March to settle. Coincidentally, that’s when the debt will exceed £5k.

I do have another question, I can’t really find an answer on the web…..

We are about to issue a letter of claim which details amount owing at 30 November and projected to 31 March which will be £5078. My understanding is that my son should not send any further demands for ground rent or service charges, as this could be construed as him acknowledging that a contract still exists between him and the lessee. Is this correct or should he send out demands as normal in April next year?

Thanks for reading, any comments gratefully received as usual!

[pater]

Firstly, ignore my post which was numbered 22, this replaces it.. It's been 'Unapproved' for a week now, and despite repeated requests to the moderator it hasn't been approved for some reason...I have removed hyperlinks in the hope that this post will work.

I've now had some sensible response from DWP regarding ground rent and service charges, as follows:

In response to your query regarding payment of service charges and ground rent as part of a Universal Credit award –

Anyone claiming Universal Credit can claim for service charges and ground rent, however if they are claiming Housing Costs for the rent they are liable for, the service charges/ground rent would need to be included in the total amount when submitting the claim – ie they would not have to include a breakdown of what is payable as rent, services charges or ground rent separately.

If the claimant is only subject to service charges and ground rent (with no actual rent being payable) they would still need to claim this as Housing Costs through their Universal Credit account. An existing claimant would need to do this by ‘Report a Change’ on their Home Page and then go to the section titled ‘Where you live and What it Costs’.

Once the leaseholder had reported the Housing Costs through their online Universal Credit account, the landlord would have to request the payment be made directly to him/her through the Landlord Portal.

I can only see this working if the lessee is willing to discuss their personal affairs with the freeholder, which in this case she won't.


Notwithstanding the above, I’ve been doing a bit more research based on advice kindly posted.

There are two distinct problems facing my son:

1. Recovery of the original debt and additional amounts since he has bought the freehold.
2. Payment of ground rent and service charges going forward.

Options for 1:

1. Do nothing, write off £5k and future accrued debt.
2. Wait until the debt exceeds £5k, apply for another CCJ, followed by Interim and Final Charging Order. sgclacy was correct when he posted that interest is chargeable at 8% only on debts above £5k. The County Courts (Interest on Judgement Debts) Order1991, and Judgements Act 1838 apply in this case.
3. Once a Charging Order is obtained, this could then be progressed to an Order for Sale (morally more acceptable than forfeiture), or potentially sold to an interested third party to provide a quick win.
4. Carry on down the path of forfeiture – this would potentially solve both of the problems with one action.

Options for 2:

1. Do nothing, continue to take the hit and fail to meet freeholder obligations.
2. Pursue DWP as above, but unlikely the lessee will co operate.
3. Carry on with forfeiture.

Whichever course of action we pursue, we can’t really do anything until next April as we’ve already given her until the end of March to settle. Coincidentally, that’s when the debt will exceed £5k.

I do have another question, I can’t really find an answer on the web…..

We are about to issue a letter of claim which details amount owing at 30 November and projected to 31 March which will be £5078. My understanding is that my son should not send any further demands for ground rent or service charges, as this could be construed as him acknowledging that a contract still exists between him and the lessee. Is this correct or should he send out demands as normal in April next year?

Thanks for reading, any comments gratefully received as usual!

[nukecad]

Thanks for reporting that DWP reply, it does clarify how they do it when there is no rent payable and only service charges.

It did give me a laugh however:

they would not have to include a breakdown of what is payable as rent, services charges or ground rent separately.

That is the correct position for Private Rentals (Social Rentals do have to provide a breakdown); however the UC staff taking a claim always insist to the claimant that they need to provide a breakdown. (Which the UC Decision Maker then simply ignores if it's a Private Rental).
We've had numerous posts on here about it from landlords scratching their heads about what they need to include in a breakdown when in reality they just have to give an overall figure.

As said though unless she actually claims them as 'housing costs' by reporting a change then you can't have it paid directly.

[pater]

Yes seems a bit at odds, although I would have thought that service charge breakdown would be fairly straightforward, it is routinely prepared as part of setting the charges. Ground rent component is also easily identified from the lease. I guess it's all part of DWP balances and checks to stop a canny landlord paying for unnecessary improvements?

[jpkeates]

We are about to issue a letter of claim which details amount owing at 30 November and projected to 31 March which will be £5078.?

I wouldn't reference any future debt (even if it's pretty inevitable).
Your son isn't owed the future debt.

[Jon66]

I would suggest you put a very short letter through the door of the lh saying

'I have done some research on our problem of you being unable to pay the service charge and ground rent. You can claim these as part of your universal credit.

You can do this by . . .etc etc

If you need help doing this let me know, or the CAB should be able to help you claim.

Yours etc'

That way you are not attaching blame and trying to open up communication channels. I'd been doing his stuff for years and non judgmental, slowly slowly does work!

I'm pleased you checked out my suggestions. Perhaps she will engage. It's very helpful to keep notes of this for the court as it will be very much in your favour that you've tried to be of practical assistance to her.

[nukecad]

I guess it's all part of DWP balances and checks to stop a canny landlord paying for unnecessary improvements?

Nope, it's simply laziness - because the law says that they need such a breakdown for Social Rentals but not for Private Rentals.
(They don't need one for PR's because PR's are capped by LHA anyway, whereas SR's are not).

To make things simple for the UC staff they are just trained to ask everyone making a claim for housing costs for a breakdown, whether it is needed or not.

Simpler for the DWP claim takers.
Harder and confusing for the claimants and their private landlords who are being told by UC that they have to provide something that is not necessary by law.
It doesn't affect/confuse Social landlords (Housing Associations) who know they always have to provide a breakdown anyway.

[pater]

It's about time I posted an update to this sorry saga!!

We sent a Letter of Claim back in December, stating amount owing to date, and a debt projection to 31 March, (the deadline given for full settlement); the letter stated that it was in contemplation of forfeiture. Bear in mind that the District Judge had warned the debtor back in August that she was at serious risk of forfeiture. I think that that (and a CCJ against her), was enough to bring her to her senses and she put her flat up for sale last September, albeit at a ridiculously high price. She was obviously trying to maximise her equity to move on to another property, fully understandable.

The flat is now sold stc, and we have the details of the conveyancing solicitor; he has within the last hour given an undertaking that the debt will be paid from the proceeds once we have submitted form LPE1. So it looks like we're almost home and dry!!
The debt is now slightly over £5k (from an original CCJ of £2.4k), and we have tried to keep costs down by DIY action, at times it's been very frustrating and a worry, but we have both learned a lot. The main observation on my part is that legal process does not readily favour a legitimate landlord attempting to recover a legitimate debt, it's a protracted process - so far about two years. I'm fairly certain that, had we proceeded with forfeiture or Order for Sale, we would have been granted Judgement eventually. But it's not something that we wanted to do from the start, so this is the best outcome all round. Oddly, the debtor had ceased communication with my son, but is now responding in a 'normal' way.

It seems that the buyer is a young person with a mortgage, so hopefully we won't be put in this position again!

Once again, thank you for all advice given, I'll post again once we've been paid.....

[Anna1985]

pater , congratulations on your success and perseverance.

I read your story with interest as our leaseholder has no intention to pay and yes, we would need to go through the path of forfeiture. As it would be cheaper than to get the leaseholder pay