Forfeiture of a Lease due to non payment

[MUNCHY84]

Hi,

My partner and I have recently received a letter off our Freeholder's Solicitors stating that if the full arrears in respect of ground rent and service charges are not paid within 14 days then they will take 'forfeiture proceedings'.

The leasehold flat is mortgaged and as I work for a finance company I am aware that we could potentially lose the property if this was to go ahead and the F/holder won.

In the whole time that we have lived at the property, we have never seen the F/holder and although works are needed externally/internally to the building, he has never addressed them.

We are aware that the g/rent needs to be paid, however, do we have a case against non payment if the service charges, as no benefit is seen in any case?

Any advice on our situation would be greatly received.

Thank you :)

[MUNCHY84]

Sorry, just wanted to clarify my last point....

We have no issue over the g/rent but do not see why we should pay an o/s service charges as nothing is ever done by the f/holder...

:)

[jeffrey]

Did F:
a. serve a ground rent demand compliant with s.166 of the 2002 Act; and
b. comply with all service charge legislation [esp. s18-s.30 of LTA 1985]?

First thing (DO IT TODAY):
Write- don't telephone- to your mortgagee (lender). Expressly tell it of the dispute. Expressly prohibit it from making any such payments.

[Corinne Tuplin]

Hi there,

Have you received a Section 166 Ground Rent Notice to pay Ground Rent? If not, Ground Rent should not be payable.

Also, have you been receiving Statements of Account for each accounting period, setting out the costs incurred together with a Section 153 Notice to accompany demands for service charges containing a summary of rights and obligations? If not, service charges should not be payable.

If you have received the correct Notices but you wish to dispute the service charges as no work has been undertaken, you can make an application to the Leasehold Valuation Tribunal for a determination on the basis of reasonableness.

If in any doubt, you should take advice as this is a complicated area.

Best wishes,


CORINNE TUPLIN
SOLICITOR
PRO-LEAGLE
www.proleagle.com

[jeffrey]

If you have received the correct Notices but you wish to dispute the service charges as no work has been undertaken, you can make an application to the Leasehold Valuation Tribunal for a determination on the basis of reasonableness.
Yes. Particularly note that T can challenge even after making payment! See s.27A(5) of LTA 1985, underlined below:

27A. Liability to pay service charges: jurisdiction

(1) An application may be made to a leasehold valuation tribunal for a determination whether a service charge is payable and, if it is, as to:
(a) the person by whom it is payable,
(b) the person to whom it is payable,
(c) the amount which is payable,
(d) the date at or by which it is payable, and
(e) the manner in which it is payable.

(2) Subsection (1) applies whether or not any payment has been made.

(3) An application may also be made to a leasehold valuation tribunal for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description, a service charge would be payable for the costs and, if it would, as to:
(a) the person by whom it would be payable,
(b) the person to whom it would be payable,
(c) the amount which would be payable,
(d) the date at or by which it would be payable, and
(e) the manner in which it would be payable.

(4) No application under subsection (1) or (3) may be made in respect of a matter which:
(a) has been agreed or admitted by the tenant,
(b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party,
(c) has been the subject of determination by a court, or
(d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement.

(5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.

(6) An agreement by the tenant of a dwelling (other than a post-dispute arbitration agreement) is void in so far as it purports to provide for a determination:
(a) in a particular manner, or
(b) on particular evidence,
of any question which may be the subject of an application under subsection (1) or (3).

(7) The jurisdiction conferred on a leasehold valuation tribunal in respect of any matter by virtue of this section is in addition to any jurisdiction of a court in respect of the matter.

[MUNCHY84]

Hi all,

Thank you for all the advice you have provided.

I am not aware of receiving any of these notices from the FH, I most definitely do not ever remember receiving an statement of account? I will check our paperwork later tonight to make sure!

I take it without these documents, the FH case wouldn't stand up in court if this is the route they decided on going down?

The letter received from the FH's sols did cc in the mortgage lender, we also have a 2nd charge who they copied in to. We have not heard anything from them as yet, but I take it they will not be happy with this potential action! We are only just coming back up to date with our mortgage payments!?

This is more inconvenience than anything else? My gut feeling is that the FH is also short on money and is just doing this in order to get some in his pocket?

[andydd]

Hi there,


If you have received the correct Notices but you wish to dispute the service charges as no work has been undertaken, you can make an application to the Leasehold Valuation Tribunal for a determination on the basis of reasonableness.
B]

In any case before any action can be taken you must of either admitted the amounts are owing or your FH will have to apply to an LVT and they will have to decide if the monies are indeed actually owing, this could possibly involve extra costs for you but this would depend upon the wording in your lease.

Andy

[MUNCHY84]

Having checked through our paperwork, I can confirm that I have never received either a section 166 or section 153 demanding the o/s amounts, having researched these on the net, I note that the FH also has to send this along with the L/holders rights and obligations, again none of this has ever been received.

I have now sent a letter to the FH acknowledging the letter that we received from their sols, in addition, I have sent a letter to the lender to keep them informed of this issue. I have sent a letter to the sols, advising that I wish for this matter not to go down the legal route, however, I require a full Statement of Account over the period in which the arrears have accrued. Now await their reply!

I most definitely want to dispute the service charges, since we have never had the pleasure of meeting the FH?!!! I would like to see where our previous payments were being invested!? Although I am worried about the costs of proving this!!? :(

[dominic]

Your previous payments should definitely not have been "invested".

They should been to pay your portion of the charges incurred for the services paid for by the LL in respecty of the freehold property.

Independent of any dispute, as lessee you have substantial rights under the LTA 1985, e.g. (in no particular order but as they come to mind):

a. Not to have to pay for charge incurred for which your portion is over £250, unless the LL has complied with the consultation requirements. (s.20)

b. Right to inspect the building insurance policy (s.30A)

c. Charges must have been "reasonably incurred" and the standard of work relating to such services musty be of a "reasonable standard". (s.19)

d. Right to request a summary of the costs incurred in realtion to the services paid for by the LL to be recouped by way of service charge (s.21) (and if service charges are payable by lessees of more than four dwellings, such summary must be signed by a qualified accountant).

e. Right to request to inspect supporting accounts in relation to the costs incurred in realtion to the services paid for by the LL to be recouped by way of service charge (s.22)

f. Right to receive a summary of your rights as lessee accompanying any demand for service cgarges (s.21B)

g. Right not to have to pay for charges which have not been demanded by the LL until more than 18 months after the charges were incurred (s.20B)

[MUNCHY84]

It will be interesting to view how the LL has used previous charges?!! Once I receive a copy of these from the LL, I will be making sure that he also provides receipts aswell to back this up. As far as I am concerned, they are not in a great position!

Can you please clarify this. If I have not received a formal demand 'section 153' for the service charges which are in arrears of more than 18 months then I legally do not have to pay them that fall into that category?

[jeffrey]

Can you please clarify this. If I have not received a formal demand 'section 153' for the service charges which are in arrears of more than 18 months then I legally do not have to pay them that fall into that category?
Section 153 merely inserts new s.21B into LTA 1985, as from 1 October 2007. Here's s.21B, with my underlining:

21B. Notice to accompany demands for service charges

(1) A demand for the payment of a service charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to service charges.

(2) The Secretary of State may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.

(3) A tenant may withhold payment of a service charge which has been demanded from him if subsection (1) is not complied with in relation to the demand.

(4) Where a tenant withholds a service charge under this section, any provisions of the lease relating to non-payment or late payment of service charges do not have effect in relation to the period for which he so withholds it.

(5) Regulations under subsection (2) may make different provision for different purposes.

(6) Regulations under subsection (2) shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

[MUNCHY84]

Thank you Jeffrey, I have so many things going around in my head right now?! Just trying to make sense of it all, at least that way I can get things right!

[jeffrey]

To make sense of it all
Summary:
1. If L does not provide the required summary of T's rights, T need not pay.
2. In that case, L cannot use any lease provisions against T.

[MUNCHY84]

Simple enough! Never received them! I take it as soon as you mention this to the LL that they will send them to you though, mean:confused:ing you will have to pay up???

[animal]

by virtue of s20b(1), if the LL does not issue a valid invoice within 18 months of expenditure, then he/she cannot recover the amount.

ref MAN/00CX/LSC/2006/0014, while this is about s47, the same applies for any invalid SC invoice.


45. The Tribunal considered that, if and when a demand were made which complied with section 47(1), section 20B(1) of the 1985 Act would come into play. Section 20B(1) prevents recovery of service charge costs incurred over 18 months before a demand for them is made and that section would therefore apply to the present situation.. The Applicants were told about costs which had been incurred in common-form letters of 176 June 2004 (referred to at paragraphs 35-37 and 21st December 2005 (referred to at paragraph 38) Those letters might have brought into play section 20B(2) which dis-applies section 20B(1) in circumstances where information in writing is given about costs incurred within the 18 month period. However the second part of subsection (2) requires something further and is a prerequisite to escaping the rigour of subsection (1). That is a statement that the costs would subsequently be required to be contributed to under the terms of the relevant lease by payment of a service charge. Neither those letters nor any other written information told the Applicants that. Consequently any costs incurred 18 months before a demand complying with section 47(1) of the 1987 are irrecoverable

[MUNCHY84]

Thank you so much for that piece of information. I have requested a copy of the accounts over the time in which the arrears have accrued, once in receipt, I will see how long this has been over and verify if they can not be recovered! :)

[MUNCHY84]

I have just received a reply from the LL to confirm that he will get the Statment of Account to us within the next 48 hours, however, it will not show much as we have not paid for 2 years?!

In regard to the 'unrecoverable after 18 months due to not receiving a formal demand', does this apply to only 6 months of the arrears??:(