Forfeiture and a reminder of the purpose of s.168 Commonhold and Leasehold Reform Act 2002

Almost every lease of a residential flat will contain a provision within it which allows the landlord to enter the flat to bring the lease to an end if a leaseholder defaults on any of its covenants in the lease. This mechanism or process is called “forfeiture”. 

Forfeiture is a complex area of the law. It is further complicated by the Doctrine of Waiver (if the landlord does something to indicate that it regards the lease as still continuing then the landlord is deemed to have waived the breach).

The Commonhold and Leasehold Reform Act 2002 introduced further safeguarding provision which now prevents a landlord from commencing proceedings for forfeiture unless and until (i) the breach of lease covenant has been determined by either a Court or First-tier Tribunal or (ii) the breach has been admitted by the leaseholder. 

Even then, even once a formal Determination has been obtained, the landlord further prevented from exercising the right of forfeiture until 14 days after the decision of the Court or First-tier Tribunal has elapsed. Matters may also further be delayed taking into account the appeals procedures.
 
Given that this is someone’s home it is not really surprising that it deserves protection from the draconian consequences of the antiquated law of forfeiture.

The Upper Tribunal recently considered both s. 146 of the Law of Property Act 1925, and s. 168 of the Commonhold and Leasehold Reform Act 2002 in the decision of Marchitelli v 15 Westgate Terrace Ltd [2020] UKUT 192 (LC).

The Law

The purpose of a 146 notice is to inform the tenant of a breach and to give him the opportunity to remedy the same or apply for relief from forfeiture, if it is incapable of remedy. Importantly the notice must be clear enough to inform the tenant of what he is alleged to have done, so that he may make amends but does not have to specify how he is to make amends. 

The purpose of s.168 is to provide clarity and to ensure that the parties know the scope and extent of tenant default prior to the inception of forfeiture proceedings. The Upper Tribunal held in Fivaz v Marlborough Knightsbridge Management Ltd [2020] UKUT 0138 (LC) that “Where application is made for a determination pursuant to s.168(4) it is essential that if a breach is proved the FTT states in clear terms what covenant (or condition) has been broken by the tenant. It should not be left to the parties to read between the lines.”

Background

In Marchitelli, the tenant was undergoing treatment for cancer and through an agent sub-let her flat. The sub-tenant used the flat as a brothel. The landlord sought determination under s. 168 that the tenant had permitted or allowed the performance of illegal or immoral acts, or behaviour amounting to a nuisance or annoyance, contrary to the express covenants under the lease. 

At first instance, while the First-tier Tribunal (FtT) found that the lease had been breached they failed to make any express finding, either in relation to her or her agent. 

The Appeal

The tenant appealed on two grounds, the Upper Tribunal (UT) dismissed one of the grounds of the appeal and upheld the second ground: Did the appellant permit or suffer the use of the flat for prostitution?

The UT observed that it was not sufficient to infer such findings from an ambiguous determination, as the landlord needed to be able to sufficiently particularise the breaches in the s. 146 notice, so the tenant was able to know what needed to be remedied or from what relief should be sought. 

It was also held that there needed to be clear finding from the FtT so that a County Court could consider whether to grant and order for possession or not. Without a clear unambiguous determination by the FtT a County Court would have to rehear the evidence before a FtT which would serve to undermine the whole purpose of having a s.168 determination in the first instance. 

The matter has been remitted to a differently constituted tribunal to determine to what degree, if any, the tenant or her agent permitted or allowed the flat being used as a brothel.

For more information about how the Property Disputes team can help you please contact Darryn Harris or Russell May.