When a leaseholder fails to pay their service charges in accordance with the lease, the landlord is entitled to forfeit the lease, subject to carrying out various steps before they are lawfully able to re-enter the property.  Due to the number of legal hoops that a landlord must jump through before forfeiture can occur, it is unusual for a leaseholder to lose their lease and the matter is more often than not resolved long before it gets to that stage (with the threat of forfeiture normally prompting the lessee or their mortgagee to settle the debt).  That said, if the leaseholder decides to reside elsewhere and does not provide the landlord with an alternative address then, as Ms Martin found out in Golding v Martin [2022] 1 W.L.R. 258 (spoiler alert!), they may come a cropper.

Background

Ms Martin lived in the flat for around 17 years until she moved abroad for work leaving the flat unoccupied.  She left her brother in charge of the flat and appointed a surveyor, Mr Watson, to act on her behalf in respect of the property.  By November 2015, Ms Martin was in significant service charge arrears and the freeholder, Mr Golding, was receiving no response to requests for payment that he had sent to both the property and Mr Watson. 

Mr Golding’s claim and Ms Martin’s application to set aside possession order

Mr Golding obtained a determination from the First Tier Tribunal that the service charge arrears were payable to him by Ms Martin and then a money judgment from the County Court followed by a possession (forfeiture) order.  He took possession of the empty property on 23 August 2016. Having extinguished the lease by forfeiture Mr Golding granted a new lease of the property in October 2016 to his daughter (as a gift) who in turn sold the property on for just under £300,000 shortly thereafter.

When Ms Martin discovered, in December 2016, that Mr Golding had forfeit the lease and repossessed the property, she applied for the order of possession to be set aside.  She pleaded grounds that the possession order was defective because she had not been allowed a period of not less than 4 weeks from the date of the possession order to pay the arrears into court in accordance with s.138(3) of the County Courts Act 1984.  In March 2019, the Court of Appeal agreed with Ms Martin on this point and set aside the possession order.  The case was returned to the County Court for a reconsideration of the possession (forfeiture) claim.

Ms Martin’s application to waive forfeiture and counterclaim

In March 2020, Ms Martin filed a defence and counterclaim, which, for the first time, included an application for relief from forfeiture and a counterclaim for unjust enrichment, the latter being on the basis that a defective possession order precluded Mr Golding from legally re-entering the property and forfeiting the lease.  Ms Martin’s argument was that, if she paid the arrears within 4 weeks of the new (correct) possession order, then she would automatically be entitled to relief from forfeiture

Mr Golding’s position was that he no longer required a possession order.  He had taken possession and the lease was now owned by someone else who was not party to the proceedings.

Court’s decision/Judgment

It was accepted that s2 Protection from Eviction Act 1977 did not apply as no one had been residing at the property at the time of the possession order.  This meant that Mr Golding was not required to obtain a possession order in order to forfeit the lease.  The judge found that the lease had been forfeit either when possession proceedings were served at the property, whether or not they came to the attention of Ms Martin (which of course they did not), or when Mr Golding re-entered and took possession of the property on 23 August 2016.  Mr Golding, in taking possession of the property, was exercising his right at common law to re-enter the property based on a breach of the lease (non-payment of service charges).  It did not matter that Mr Golding took this action believing he was enforcing the possession order. 

Therefore, as Mr Golding had never needed a possession order and Ms Martin was not, in any event, in a position to deliver up possession to Mr Golding, her defence that she required a new possession order to be made, in order that she could then pay the arrears within the relevant period, became irrelevant.

With regard to Ms Martin’s application for relief from forfeiture, this also failed for being way out of time - it had only been made three and a half years after the possession order.  Her counterclaim for unjust enrichment also failed because Mr Golding’s enrichment flowed from his lawful exercise of rights and so he was not unjustly enriched. 

Ms Martin had lost her home and was unable to recover any compensation for this.

Comment

This case serves as a warning to non-resident leaseholders to ensure that they provide to their landlord a correspondence address to which documents sent will come to their attention.  If they wish to keep the property address as the address for service, then they should ensure that they have in place alternative arrangements to ensure that said demands come to their attention. 

Ms Martin found to her considerable cost (we know from the above that the flat was worth nearly £300k in 2016/2017) the perils of not ensuring the above was in place.

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