How hard can forfeiture be?

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    #31
    Originally posted by Anna1985 View Post
    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
    Thanks Anna, I wish you luck, I have been genuinely surprised at how far a leaseholder can rack up debt with apparent impunity. The legal process is long winded, especially if solicitors are involved. Although the overwhelming majority of info is biased towards the leaseholder (not the big bad freeholder), I found much of that useful as it spells out what steps a freeholder must take to recover the debt/reclaim the lease. Unfortunately in our case, the leaseholder made it clear from the start that she would not comply unless a court order was obtained; I think that she was banking on the fact that we wouldn’t pursue the debt. Eventually she realised that her strategy was flawed and began to see reason, I think that she was also getting free legal advice, and of course the judge warned her of forfeiture.
    I was hoping for forfeiture to be granted had we finished up in front of the same judge, but I guess he could have instead pointed us towards an order for sale; I couldn’t honestly say which way it would have gone.

    Hope that you succeed!

    Comment


      #32
      pater, thank you. I fully appreciate the process as a leaseholder and freeholder.
      ​​​​​

      And yes, impunity is the right word. Imho, current process is not to benefit of LH/FH but to the benefit of the system.

      We would be happy with any outcome but as it seems the LL doesn't understand his responsibilities under the lease, we would be along with several claims pursuing the forfeiture in order to have the property maintained.

      ​​​​​

      Comment


        #33
        Well this is a post that I hoped I wouldn't have to write! Further to the 'sale' that we thought we had in post #29, turns out that nothing has happened to move the sale on (no notice for transfer, LPE1 etc), and I can't get any information from either the leaseholder's or 'buyer's' solicitor. My son and I have come to the conclusion that we're being strung along, there is no buyer, and the leaseholder still thinks that this will all go away. We have tried to be as open and honest as we can, but all she has not reciprocated at all.

        We now have a second CCJ, and a charging order against the flat. Total debt is now over £7k.

        So, we (my son) applied for forfeiture yesterday, and it is going through the court process. It won't go to hearing because of Covid, but will be assessed by a judge and we take it from there. I am encouraged by the comments of the Judge at the CCJ hearing, who firmly cautioned the leaseholder against risk of forfeiture, and that she could "walk away with nothing"....

        Watch this space, I'll keep it updated with progress, good or bad.

        Comment


          #34

          Did your son ever issue service charge demands to the lessee concerned?
          Was a s.146 Notice served?

          Comment


            #35
            Hi vmart, thanks for your questions.

            There were rent and service charge demands issued for 20-21 by the management company; this was done as the lessee had indicated to my son (as the new freeholder), that she would be prepared to pay and we trusted her! We're aware of the potential risk of waiver if demands are issued, so no demands were issued for 21-22. As far as total debt is concerned, I have included the ground rent and service charges for 21-22, but wondered if non service of demands for 21-22 charges could be a defence for non payment? Although I understand that the demands can be back dated if necessary.

            Following on the same line of thought, I have wondered how my son proves that the lessee hasn't paid any ground rent or service charges. We have a statement from the management company but wondered if that would be enough if she claims that she's paid? So far she hasn't disputed that she owes the money, but that may change when she realises what is at risk.

            Immediately following the CCJ hearing in August 2020 a letter was sent to the lessee which summarised her debt (£4664), and gave her until 31 March 2021 to settle. The lessee subsequently sent a text to my son thanking him for his generous time allowance and that she would sell her flat to pay the debt in full......once again we trusted her .

            After a bit more research a letter of claim was sent in December 2020, which I hope satisfied all of the requirements of s.146; I used a template from a MoJ website to draft the letter for my son. It set out the amount of debt in detail and the breaches of lease, sent 'in contemplation of forfeiture'. As usual, the lessee did not respond even though my son included the information sheet and reply form, and verbally told her that she needs to act.

            If you can spot a flaw in the plan, please point it out, although it's a bit late for me to correct now! My gut feeling is that forfeiture will be granted with conditions....but we'll see.

            Thanks

            Comment


              #36
              Originally posted by pater View Post
              We're aware of the potential risk of waiver if demands are issued, so no demands were issued for 21-22. As far as total debt is concerned, I have included the ground rent and service charges for 21-22, but wondered if non service of demands for 21-22 charges could be a defence for non payment? Although I understand that the demands can be back dated if necessary.
              Neither service charges or ground rent are owed until they have been correctly demanded in accordance with both the terms of the lease and relevant legislation.
              I would suggest that you make sure that you get appropriate, paid legal advice on how you should proceed - taking into account the fact that you cannot reasonably expect to be awarded forfeiture (which would give your son possession of a lease that is likely worth at least 10x the debt - even if the amounts that have not yet been demanded, and are therefore not yet due, are included). Usually the main reason for pursuing a debt of this sort of amount as if forfeiture was the desired outcome would be because that is often the only way that legal costs can be recovered under the terms of the lease.

              Comment


                #37
                Forfeiture is not designed to provide freeholders with a windfall. Therefore forfeiture exceptionally rarely occurs. Even where it does, there is “relief from forfeiture” which is nearly always granted.

                While I only glanced at the headlines of this thread, I suspect the OP’s son waived his right to forfeiture by issuing service charge demands/ground rent demand 20/21. It is irrelevant it was the managing agent (MA) that issued the demands since the MA is the agent of the freeholder (bound by the actions of his predecessor in title too). This will not prevent enforcing the judgement/charging order but remedy is unlikely to be via the forfeiture route.

                Furthermore, no s.146 Notice was issued. Though there is no prescribed format (s.146) it is likely the letter referred to would not be considered a valid notice even if it had been lawfully issued and included all of the mandatory points required.

                Additionally, a claim for service charges where demands were not issued cannot be made until the charges are demanded in the correct format.

                And finally, with regard to backdating service charges, a freeholder can only go back 18 months unless the lessee was notified of future charges in the correct format.

                The OP is optimistic forfeiture will be granted – I suspect he will be disappointed and should take professional advice before incurring further costs and possibly the wrath of the court.



                Comment


                  #38
                  Thanks to Macromia and vmart for taking the time to respond, much appreciated.

                  The decision to apply for forfeiture has not been easy for the reasons cited above. We have made it clear to the lessee over the last two years that it is not a course of action that we wish to pursue, but she has not engaged with any of the solutioneering that we have proposed.

                  I have the following observations/questions, not necessarily expecting answers!

                  1. I have read a lot around the subject of forfeiture during the last 18 months, and it elicits quite different opinions regarding appropriateness and success, even amongst professionals; I've taken advice from two local senior solicitors who advised forfeiture as the best course of action. Additionally, a local District Judge has warned the lessee of the risk of forfeiture. But we're prepared for the prospect of failure - perhaps because of the procedural errors noted above.

                  2. I accept that my son's chances of success may be compromised by the issue of demands and lack of specific s146 headed letter. I guess that will be decided by the Judge if it gets that far. I realise that it may be rejected by a Court Officer long before reaching a Judge. However, this is stressing my son greatly so I feel that I must do what I can to help get the situation resolved. I take the point regarding professional help, but we have been given quotes in excess of £3k (with no guarantee of success), which neither of us can afford to risk.

                  3. I remain confused by the dichotomy of issue of demands v waiver of right to forfeiture. If the demands aren't issued, the lessee has a ready made defence for non payment; if demands are issued, the right to forfeiture is waived......discuss! I also take the points that forfeiture may well fail or be granted relief/conditions, but that leaves me wondering why there is any point having a (very prescriptive), forfeiture clause in the lease?

                  4. S166 demands for ground rent and service charges were made from 2016 - 2020 as a matter of course by the management company, even though they knew that the lessee had no intention of paying. The previous freeholder was declared bankrupt in 2019 and didn't really have a grip on the situation, or responsible management of the property. My son bought the freehold in good faith as he wanted to be master of his own destiny - not for financial gain. He had to pay the accrued debt (circa £2k), to the freeholder's administrator as a condition of purchase.

                  5. I had also looked at trying to obtain an Order for Sale, which seemed to be a more convoluted process, but may re consider that if forfeiture fails. At least I think that would be a fairer outcome to the lessee. Forfeiture does seem to be a draconian step for a debt of circa £7k; we already have CCJ's for almost £6k but the debt continues to accrue.

                  Anyway, the application has been submitted, so there's not much that we can do for now; as previously stated, I simply cannot sit back and watch this affect my son so badly. I will certainly feed back progress reports so that anyone in the same situation can learn from my mistakes.......or success!

                  Thanks for taking the time to read, all comments welcome.

                  Comment


                    #39
                    PLEASE SEE MY COMMENTS INTERPOLATED BELOW IN ITALICS.

                    Thanks to Macromia and vmart for taking the time to respond, much appreciated.

                    The decision to apply for forfeiture has not been easy for the reasons cited above. We have made it clear to the lessee over the last two years that it is not a course of action that we wish to pursue, but she has not engaged with any of the solutioneering that we have proposed.

                    I have the following observations/questions, not necessarily expecting answers!

                    1. I have read a lot around the subject of forfeiture during the last 18 months, and it elicits quite different opinions regarding appropriateness and success, even amongst professionals; I've taken advice from two local senior solicitors who advised forfeiture as the best course of action. Additionally, a local District Judge has warned the lessee of the risk of forfeiture. But we're prepared for the prospect of failure - perhaps because of the procedural errors noted above.

                    Could it be you are reading too much into the Judge’s comments? In any event, legal requirements and procedure needs to be followed. S.146 is a complicated area. A reason freeholder’s take the s.146 route is it usually enables the freeholder to recover legal costs (subject to relevant terms in the lease) cited by another poster.

                    2. I accept that my son's chances of success may be compromised by the issue of demands and lack of specific s146 headed letter. I guess that will be decided by the Judge if it gets that far. I realise that it may be rejected by a Court Officer long before reaching a Judge. However, this is stressing my son greatly so I feel that I must do what I can to help get the situation resolved. I take the point regarding professional help, but we have been given quotes in excess of £3k (with no guarantee of success), which neither of us can afford to risk.


                    Litigation is not cheap and unfortunately if one decides to be a freeholder there are legal obligations. You may find useful information on the LEASE website; and/or might consult a solicitor for headline advice rather than pass the case over to them. Professional advice may enable you to make changes now rather than start again if the case does not go your way. (s.146 Notice needs to meet legal requirements. It is not just a matter of heading the communication “s.146 Notice”.)

                    3. I remain confused by the dichotomy of issue of demands v waiver of right to forfeiture. If the demands aren't issued, the lessee has a ready made defence for non payment; if demands are issued, the right to forfeiture is waived......discuss! I also take the points that forfeiture may well fail or be granted relief/conditions, but that leaves me wondering why there is any point having a (very prescriptive), forfeiture clause in the lease?
                    1. It is not a question of “defence”. There is nothing to defend since until the freeholder issues demands for service charges in accordance with the lease and the law there is no invoice to pay. A freeholder cannot sue for non-payment when they have not demanded payment no more than a company could sue a customer for payment of goods if they failed to invoice the customer.
                    2. If a freeholder decides to forfeit they cannot do anything that acknowledges the lease. Issuing service charge demands or demanding ground rent waives the right to forfeit.

                      4. S166 demands for ground rent and service charges were made from 2016 - 2020 as a matter of course by the management company, even though they knew that the lessee had no intention of paying. The previous freeholder was declared bankrupt in 2019 and didn't really have a grip on the situation, or responsible management of the property. My son bought the freehold in good faith as he wanted to be master of his own destiny - not for financial gain. He had to pay the accrued debt (circa £2k), to the freeholder's administrator as a condition of purchase.

                    s.166 does not apply to service charges. If service charge demands were not issued in accordance with legislation they may be invalid and the charges are not payable. Remember your son only has 18 months to re-issue so it may be worth checking demands issued met requirements. You may also, following professional advice, decide to acknowledge the lease and bring demands up-to-date or your son may forgo the money that would be owed.

                    5. I had also looked at trying to obtain an Order for Sale, which seemed to be a more convoluted process, but may re consider that if forfeiture fails. At least I think that would be a fairer outcome to the lessee. Forfeiture does seem to be a draconian step for a debt of circa £7k; we already have CCJ's for almost £6k but the debt continues to accrue.


                    See points under 2. Above.

                    Comment


                      #40
                      How many flats are there in the building? What type of building is it?
                      When your son purchased the freehold, was it offered to all leaseholders under Right to First Refusal?

                      Comment


                        #41
                        A charging order would as it is over £5k attract interest at the statutory rate - once that is in place you can always sell on the debt and it the retest rate is 8% you will probably get the e face value of the debt

                        Comment


                          #42
                          Thanks again for responses, all noted.

                          vmart, I had considered paying for a short consultation, but now the application is in the system I don’t think that I could make changes. If it’s rejected then I’ll take stock and consider options.

                          AFAIK all demands have been correctly served by the management company, certainly the other lessee has been paying on time.

                          The property is a large terraced house converted into three flats, my son bought his in 2017. He didn’t know the situation at the time with the freeholder who was useless. When the freeholder declared bankruptcy in 2019 the freehold was offered to the leaseholders, who were all initially enthusiastic about collectively buying the freehold, they were all aware that it would be circa £18k. As the auction approached, the other two lessees pulled out, leaving my son to go it alone as a private individual. He was able to buy the freehold and settle the ‘problem’ lessees debt with money left to him from my father, and help from me. There was nothing left in the service fund after buildings insurance was paid, so my son has been trying to build a reasonable working contingency as there is some building maintenance to do, but it’s difficult when a third of the income is missing!

                          sgclacy, thanks for your comments.

                          Comment

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