When leaseholders are in breach - some Do’s and Don’ts
13th June 2018
13th June 2018
When a leaseholder is in breach of the terms of a lease and your client wishes to enforce the lease terms, it is likely that your client will wish to do so with reliance upon the landlord’s right of forfeiture. The reason for this is twofold:-
Commonly, the client’s ability under the contract (the lease) to recover any costs of enforcement action taken against the 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;
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.
The right of forfeiture can be waived, expressly or involuntarily, by the landlord (including 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 the client’s enforcement options are limited to less effective remedies that may not see the client recover the monies due, or see a particular issue rectified, as quickly as it might otherwise have been. More importantly, where the client’s right to recover enforcement costs is tied to the right of forfeiture, the client 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, as agents, 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 client 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.
Do’s and Don’ts
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 no demands can be sent
DO ensure that any direct payments received are placed in a suspense account and instructions sought from the client before processing
DO suspend all demands and the ability to send correspondence to or serve notices* on the lessee
DO react if the lessee reports an issue to you with the flat or the building but seek the client’s or their lawyer’s advice before responding to the lessee
DO refer questions received from the lessee to the client’s lawyers, once they have been appointed
The absolute Don’ts
DON’T leave the matter unattended until the client has appointed solicitors
DON’T accept any payments, other than the full balance (including costs and interest) tendered where the breach is only monetary
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 client or the lawyers that what you are seeking to do does not compromise the client’s enforcement rights and includes all costs and interest that the client is able to recover
The Golden Rule
If in doubt - ask the lawyer first and only then act
-* If the client has commenced, or needs to commence, section 20 consultation then it is very important that you speak to the client’s lawyers before carrying on with that process or electing to leave the offending lessee out.
-** Consider with the client or their 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.
For more information, please contact Susan Fox, Senior Litigation Executive, on 01435 897297 or firstname.lastname@example.org.
This 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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