How hard can forfeiture be?
Firstly, hello to all! I’ve been a lurker for a few weeks and am so relieved to find a site that helps landlords/freeholders. I’m fairly new to this experience and get the impression that, by and large, landlords are generally regarded as people that don’t need or deserve any help….although could be wrong on that .gif "(wasntme)")
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I’ve searched the forum for a similar case but cannot find one; my story is a little lengthy but I’ll summarise:
I’m acting on behalf of my son who is the freeholder of a property that was converted to three leasehold flats in 2008. He works full time as a project manager, I’m retired so have the time to do the legwork on his behalf.
He bought the leasehold to his flat in 2017, unbeknownst to him at the time the freeholder was a complete failure in terms of meeting his obligations. In 2019 the freeholder declared himself bankrupt so my son managed to buy the freehold at auction for £18k, money left to him by my father. His main reasons for buying were to manage the freehold in a professional manner and to have some control over his destiny. We found out during the buying process that one of the lessees has not paid any ground rent or service charges since she bought her lease in 2016; we had to pay almost £2k to clear her debt to the outgoing freeholder. She had paid cash (from her divorce settlement), for her flat and has the mindset that she does not have to pay any more money; she is a very difficult person to deal with. Crucially, she does not work and claims that her sole source of income is Universal Credit, has no assets to speak of and is mortgage free.
Prior to the previous freeholder going bankrupt, the property management company had arranged for solicitors to commence legal action to recover the debt; this was suspended until my son had completed, so it was recommenced in August 2019. My son was initially happy for the solicitors to continue; with hindsight this subsequently proved to be a poor decision. He was passed from pillar to post by the (large firm), of solicitors/para legals, whilst the debt was continuing to accrue. Eventually in Feb 2020 the law firm managed to obtain judgement for my son, albeit for service charge arrears only, (£2468.53), and paid in instalments of £46/month. They later admitted that they had made an administrative error by excluding the ground rent arrears, the proper claim should have been for approx. £4k. The law firm eventually agreed to appeal against the instalments, and in Aug 2020 the original judgement was set aside and my son received judgement for the full amount to be paid forthwith. Interestingly the Judge warned the lessee several times that she was in a very precarious situation and could lose everything by forfeiture. He strongly urged her to seek legal advice as a matter of urgency. As far as we are aware, the lessee has been consulting CAB since 2019, who advised her to declare that she has COPD (although she still smokes), and therefore no court would grant forfeiture. At the August hearing the Judge did not appear to be concerned about the COPD. We had already had a meeting with the lessee in Dec 2019 in which she clearly stated that she would only do what a court ordered; we expressed our frustration and suggested that she considered selling her flat to settle her debt. Following the second judgement, we sent the lessee a letter in August 2020 detailing the amount owing, and that we were prepared to give her until 31 March 2021 to settle the debt. She subsequently informed my son by text that she would sell her flat to settle the debt in full. In late September she advertised her flat for sale, albeit at an inflated price of approx. 40% above its true market value and incorrect remaining term of lease, perhaps to discourage potential buyers? There has been no genuine interest in the property, e.g. no viewings or offers.
The law firm has since suggested to my son that they go back to court to obtain judgement for the correct amount, and then proceed to apply for forfeiture. They have given him an estimate of costs of circa £4500 to do this. I do not see the point in pursuing another CCJ for the correct amount as she does not have the means to pay, but I can see the merits of forfeiture.
My son does not have that sort of money at his disposal, so I have decided to act on his behalf, so now we come to the point of my post – at last!
I have done a lot of reading around the subject of forfeiture, and whilst there seems to be a certain amount of cautionary notes for landlords, I see the process as relatively straightforward in this case. I have in the past conducted my own divorce, and successfully used the Small Claims Court on several occasions, so have a feel for how the courts work. Perhaps I should have been a solicitor instead of an engineer….
We intend to send a letter of claim on 2 December; this has been drafted in accordance with the pre action protocols detailed here:
https://www.justice.gov.uk/courts/pr...s/debt-pap.pdf
Depending on lessee response, we will need to approach the First Tier Tribunal if the debt isn’t acknowledged, or submit court form N5 if it is. So far, the lessee has not formally acknowledged or denied any of the debt, but the courts did not previously allow that to affect judgements. If judgement is granted then we will apply for repossession with form N119 and subsequent eviction by bailiffs if appropriate.
The debt will be a little over £5k by the 31 March deadline; the flat is probably worth circa £90k.
All relevant demands for ground rent and service charges have been issued correctly in accordance with Section 166 since 2016, and there is a comprehensive clause in the lease re forfeiture. I am aware of the Doctrine of Waiver, and we do not intend to do anything that could acknowledge existence of the lease from now on.
I have read the information around a Section 146 notice, but think that the actions above are more appropriate as we are pursuing a debt, not breach of covenant. We have repeatedly told the lessee that this is not a course of action that we want to pursue, but she has left us with little alternative. I am also aware of the recent Covid related legislation regarding evictions. I have also considered taking out a charging order on her flat, but there seems to be little point until she gets some interest from a potential buyer.
Needless to say, this is stressing my son out big style as he now really regrets buying the freehold with his Grandads money; he feels that he’s let Grandad down.
Anyway, thanks for reading, please let me know if I’ve got this wrong or could be doing something differently or in a more effective way – I will certainly keep the post updated for anyone else in a similar position.
.I’ve searched the forum for a similar case but cannot find one; my story is a little lengthy but I’ll summarise:
I’m acting on behalf of my son who is the freeholder of a property that was converted to three leasehold flats in 2008. He works full time as a project manager, I’m retired so have the time to do the legwork on his behalf.
He bought the leasehold to his flat in 2017, unbeknownst to him at the time the freeholder was a complete failure in terms of meeting his obligations. In 2019 the freeholder declared himself bankrupt so my son managed to buy the freehold at auction for £18k, money left to him by my father. His main reasons for buying were to manage the freehold in a professional manner and to have some control over his destiny. We found out during the buying process that one of the lessees has not paid any ground rent or service charges since she bought her lease in 2016; we had to pay almost £2k to clear her debt to the outgoing freeholder. She had paid cash (from her divorce settlement), for her flat and has the mindset that she does not have to pay any more money; she is a very difficult person to deal with. Crucially, she does not work and claims that her sole source of income is Universal Credit, has no assets to speak of and is mortgage free.
Prior to the previous freeholder going bankrupt, the property management company had arranged for solicitors to commence legal action to recover the debt; this was suspended until my son had completed, so it was recommenced in August 2019. My son was initially happy for the solicitors to continue; with hindsight this subsequently proved to be a poor decision. He was passed from pillar to post by the (large firm), of solicitors/para legals, whilst the debt was continuing to accrue. Eventually in Feb 2020 the law firm managed to obtain judgement for my son, albeit for service charge arrears only, (£2468.53), and paid in instalments of £46/month. They later admitted that they had made an administrative error by excluding the ground rent arrears, the proper claim should have been for approx. £4k. The law firm eventually agreed to appeal against the instalments, and in Aug 2020 the original judgement was set aside and my son received judgement for the full amount to be paid forthwith. Interestingly the Judge warned the lessee several times that she was in a very precarious situation and could lose everything by forfeiture. He strongly urged her to seek legal advice as a matter of urgency. As far as we are aware, the lessee has been consulting CAB since 2019, who advised her to declare that she has COPD (although she still smokes), and therefore no court would grant forfeiture. At the August hearing the Judge did not appear to be concerned about the COPD. We had already had a meeting with the lessee in Dec 2019 in which she clearly stated that she would only do what a court ordered; we expressed our frustration and suggested that she considered selling her flat to settle her debt. Following the second judgement, we sent the lessee a letter in August 2020 detailing the amount owing, and that we were prepared to give her until 31 March 2021 to settle the debt. She subsequently informed my son by text that she would sell her flat to settle the debt in full. In late September she advertised her flat for sale, albeit at an inflated price of approx. 40% above its true market value and incorrect remaining term of lease, perhaps to discourage potential buyers? There has been no genuine interest in the property, e.g. no viewings or offers.
The law firm has since suggested to my son that they go back to court to obtain judgement for the correct amount, and then proceed to apply for forfeiture. They have given him an estimate of costs of circa £4500 to do this. I do not see the point in pursuing another CCJ for the correct amount as she does not have the means to pay, but I can see the merits of forfeiture.
My son does not have that sort of money at his disposal, so I have decided to act on his behalf, so now we come to the point of my post – at last!
I have done a lot of reading around the subject of forfeiture, and whilst there seems to be a certain amount of cautionary notes for landlords, I see the process as relatively straightforward in this case. I have in the past conducted my own divorce, and successfully used the Small Claims Court on several occasions, so have a feel for how the courts work. Perhaps I should have been a solicitor instead of an engineer….
We intend to send a letter of claim on 2 December; this has been drafted in accordance with the pre action protocols detailed here:
https://www.justice.gov.uk/courts/pr...s/debt-pap.pdf
Depending on lessee response, we will need to approach the First Tier Tribunal if the debt isn’t acknowledged, or submit court form N5 if it is. So far, the lessee has not formally acknowledged or denied any of the debt, but the courts did not previously allow that to affect judgements. If judgement is granted then we will apply for repossession with form N119 and subsequent eviction by bailiffs if appropriate.
The debt will be a little over £5k by the 31 March deadline; the flat is probably worth circa £90k.
All relevant demands for ground rent and service charges have been issued correctly in accordance with Section 166 since 2016, and there is a comprehensive clause in the lease re forfeiture. I am aware of the Doctrine of Waiver, and we do not intend to do anything that could acknowledge existence of the lease from now on.
I have read the information around a Section 146 notice, but think that the actions above are more appropriate as we are pursuing a debt, not breach of covenant. We have repeatedly told the lessee that this is not a course of action that we want to pursue, but she has left us with little alternative. I am also aware of the recent Covid related legislation regarding evictions. I have also considered taking out a charging order on her flat, but there seems to be little point until she gets some interest from a potential buyer.
Needless to say, this is stressing my son out big style as he now really regrets buying the freehold with his Grandads money; he feels that he’s let Grandad down.
Anyway, thanks for reading, please let me know if I’ve got this wrong or could be doing something differently or in a more effective way – I will certainly keep the post updated for anyone else in a similar position.
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