When a leaseholder is in breach of the terms of a lease and you wish to enforce the lease terms, it is likely that you will wish to do so with reliance upon the landlord’s right of forfeiture.  The reason for this is twofold:-

1. Commonly, your ability under the contract (the lease) to recover any costs of enforcement action taken against the defaulting leaseholder is linked and subject to the exercise of the landlord’s right to forfeit the lease for the particular breach even if forfeiture is not actually pursued or achieved;

2. Whilst rarely exercised, the right to forfeit the lease for the breach is generally the best remedy available to the landlord in the face of a non compliant leaseholder. 

But beware…

The right of forfeiture can be waived, expressly or involuntarily, by the landlord or the landlord’s agent, lawyer, surveyor, porter etc.).  Once that right has been waived by any party acting for, or in the name of, the landlord, forfeiture is, in most cases, simply no longer available to the client in respect of that specific breach. 

In that case your enforcement options are not lost but they are limited to less effective remedies that may not see the particular breach/issue rectified as quickly as it might otherwise have been where the threat of forfeiture remained.  More importantly, where the right to recover enforcement costs is tied to the right of forfeiture, you may then be at risk of non recovery of some or all of those costs incurred in any action for remedy of the breach.

It is therefore best to be vigilant about what waiver is and ensure that it does not occur accidentally or otherwise.   It is for that reason that we at KDL always advise that you should mark your files "IN BREACH" when you become aware of a breach.  Such an approach will tend to ensure that you at least will not be the cause of an accidental waiver.

What is Waiver?

Waiver occurs when, after knowledge of a specific once and for all breach, the landlord or other "representative" of the landlord acts in such a way as to recognise the continuance of the lease despite the breach e.g. demands/accepts rent or other charges, answer LPE1 request etc. In the case of most breaches of a lease an act of waiver is fatal to the right of forfeiture. It is therefore important to consider the following suggested Do's and Dont's.

Do’s and Don’ts

The Do’s

• DO mark your file "In Breach" as soon as you become aware of the breach, even where the client has yet to appoint solicitors, so that those dealing with the file are less likely to waive the landlord's right of forfeiture for that breach

• DO ensure that any direct payments received are placed in a suspense account and instructions sought from the client before processing and, if those payments are to be rejected (in order to prevent waiver) that you obtain advice on the notice of such to be sent to the leaseholder

• DO suspend all demands and the ability to send correspondence to or serve notices* on the lessee

• DO obtain advice before responding to pre sale (LPE1 Questionnaire or other less formal questions) questions/correspondence received from the offending leaseholder or their solicitors

• DO react if the lessee reports an issue to you with the flat or the building but seek the lawyer’s advice before responding to the lessee

• DO refer questions received from the lessee to the lawyers, once they have been appointed

 The absolute Don’ts

• DON’T leave the matter unattended until you have appointed solicitors - waiver can occur any time after the breach

• DON'T respond to pre sale enquiries without first obtaining advice on how that may affect your action for the breach

• DON'T accept notice of assignment where the property has been sold without remedy of the breach - seek advice if this occurs because the incoming leaseholder rarely will be liable for the breach of the former owner - see here

• DON’T accept any payments, other than the full balance (including costs and interest) tendered where the breach is only monetary, without first obtaining advice on the effects of accepting that payment

• DON’T accept any payments where the breach includes a non monetary issue

• DON’T raise demands of the lessee **

• DON’T treat ‘non service charge matters’ as not relevant to the waiver issue

• DON’T agree a payment plan without first checking with the lawyers that what you are seeking to do does not compromise your enforcement rights and includes all costs and interest that you are able to recover

The Golden Rule 

If in doubt - ask the lawyer first and only then act  

*  If you have commenced, or need to commence, section 20 consultation then it is very important that you speak to the lawyers before carrying on with that process or electing to leave the offending lessee out - see here 

**  Consider with the lawyers whether it is prudent to serve, in place of withheld demands for accruing service charges, notices pursuant to section 20B of the Landlord and Tenant Act 1985 in respect of those sums so as to protect the client’s right to recover those charges later - see here

For more information, please contact us on 01435 897297 or info@kdllaw.com

Disclaimer

This Legal Update describes the position in law as at the date of this article and care should be taken to note any subsequent amendments to the position as set out above.  The Legal Update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.

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