This is No Game of Forfeits

I tell my clients that you can mess the courts about, but you cannot (and must not) ignore them. And if you do, then unpleasant things are bound to happen to you. This is a salutary tale.

The Times reported on Saturday 15.9.18 the sad and unusual case of Malik v McCadden. I can’t give you a link because of their paywall. But the brief facts are that McC bought a long lease of the upper floor of a house in North London from M (who lived on the ground floor) for some £518,000 in 2016. The lease appears to have contained the usual clauses prohibiting structual alterations without consent, but shortly after completion McC seems to have carried out substantial alterations including resiting the gas boiler, removing fixtures, rendering the outside, removing floorboards and installing a new central heating system, bathroom and kitchen.  He did not ask for consent for any of this.

The building work was disruptive to M, and McC had removed carpets, in breach of the lease, making the floors noisy. He also failed to pay his share of service charges for insurance and management.

M tried to get access to the flat to see what exactly was going on but was refused on 5 occasions, and correspondence was ignored. So M had to go to court and ask the court to bring McC’s lease to an end – to forfeit it. This is the nuclear option, because it means the tenant loses the property without any compensation, and the landlord can sell it again to someone else. The law has therefore imposed a large number of restrictions on doing this.

It isn’t as easy as just issuing a summons. Before issuing the landlord has to serve  notice under s146 Law of Property Act 1925. This warns the tenant of the breach, requires them to rectify it, and to pay the landlord compensation, and gives the tenant a reasonable time to do so. The only time this isn’t needed is if the rent is in arrears, which wasn’t the case here.

But you can’t even serve a s146 notice without a determination by a court or tribunal that the tenant is in breach unless they admit it – s168 Commonhold & Leasehold Reform Act 2002. So M applied to the First Tier Tribunal (Property Chamber) – the old LVT – for the appropriate decision. The FTT sent out their directions, advising McC to take legal advice, and arranging a site-inspection. McC ignored these, and didn’t let the FTT in. They went ahead with their proceedings and decided in November 2017 that the breaches of the lease were serious, and that a s146 notice could be served. They advised McC to take advice. He continued to ignore them.

The s146 notice was served, nothing further happened and so the landlord issued proceedings in the County Court at Willesden asking for forfeiture and possession, and this was served and listed, no doubt many weeks ahead.

Now, the courts have always treated the power to forfeit a lease as being just a form of security for the landlord, and will grant relief from forfeiture if the tenant applied for it and gives suitable undertakings to put things right, or pay the arrears of rent or service charges if applicable, and pay the landlord’s costs of having to go so far. This is a very old power, pre-dating even the Law of Property Act 1925, and the courts will nearly always grant it, or possibly give an adjournment for the tenant to get themselves organised, or make an order but postpone it for say 6 months to let the tenant sell the property, because they don’t want to push the nuclear button any more than most landlords want to ask for it to be pushed. However, a tenant has to ask for relief in order to get it, and it appears that McC didn’t attend the hearing and so an order was made in August 2018  bringing the lease to an end and giving possession to M.

This is pretty disastrous for McC. He has probably* lost a flat worth some £600,000 (according to The Times article) and M has a windfall, and the prospects of a better neighbour to boot. But the case has been reported, and covered in this blog, because it is so very unusual for things to go so far. Virtually all cases of this sort come to an end after the FTT decision that the tenant is in breach, or when the s146 notice tells the tenant that the landlord is seriously going for possession, or at the very latest when the proceedings are issued, and the tenant makes an application for relief, which nearly always succeeds. But if you do nothing, don’t attend the hearings, and don’t take advice (or possibly don’t listen to the advice you are given) then it will certainly lead to tears by bedtime.

The tenant’s explanation – that he was unaware of the FTT proceedings, and unable to defend the County Court proceedings after being let down by lawyers – must be weighed against the fact that the FTT decided that he knew about the proceedings, and that the County Court would have been satisfied that he had been served with the s146 notice, and the court proceedings before making its order.  He is unfortunate in that he doesn’t have a mortgagee. They normally wade in with gusto if there is any risk to their mortgage security, paying arrears, applying to be joined into the case and asking for relief themselves, as well as harrying the tenant to get things resolved without delay.

Can you blame the landlord, M? Well, what else could they do to protect their investment, and ensure that the tenant sticks to the terms of the lease? This is the way leases work, and normally – probably in 99 cases out of 100 – you don’t get an order for forfeiture. I have never actually come across a forfeited long residential lease, although I have got pretty close on occasions, in more years than I care to remember acting for landlords, and tenants, in this field.

And the reason for the probably*? Well, it is still possible to apply for relief even after the order has been made, although the tenant will need to get on with things, and admit that they are in breach in the ways that the FTT decided, and give credible undertakings to put things right. Given McC’s history, this doesn’t look too promising.

There is a good, and more detailed, piece on this by Nearly Legal, and lots of comments on Twitter and elsewhere. It is really one for the records.

 

Advertisements