Forfeiture clause in leasehold agreement

Dawn299

Hi,

I'm planning to buy a new built leasehold property with remaining lease of 125 years. Everything seemed fine unless I went through the leasehold agreement in detail. It had a clause which says that "The Landlord may re-enter the Property (or any part of the Property in the name of the whole) at any time after any of the following occurs (a)any Rent, Insurance Rent, Service Charge or any other rent due under this lease is wholly or partly unpaid 21 days after becoming payable;(b)any breach of any of the Tenant Covenants. If the Landlord re-enters the Property (or any part of the Property in the name of the whole) pursuant to this clause, this lease shall immediately end, but without prejudice to any right or remedy of the Landlord in respect of any breach of covenant by the Tenant" There is another clause which says "Section 8 of the Housing Act 1988 will not apply if the Rent falls into arrears". This sounded a bit alarming to me as it seems I can lose a lease worth hundreds of thousands just based on arrears of a couple of hundred of pounds for 3 weeks!! My lawyer says that it is a standard clause. Am I over reacting here it is something really as alarming as it sounds?

da_rule

Yes it is standard.

If it were to happen, you could apply to the courts for relief from forfeiture. However, the key is to make sure that you pay the rent etc on time and that you don’t breach any of the covenants.

Also, the landlord has to peacefully enter, they can’t force entry etc, so if you do get into arrears just keep the door locked.

Dawn299

It sounds a bit odd that after paying such a huge amount, losing everything would come down to just whether the property was locked or unlocked! I obviously do plan to pay the rent on time via direct debit but since it's a long term lease it is not totally inconceivable that one odd time some 20yrs down the line a payment falls into 3 weeks arrears. Is there enough statuary protection available for me to enter a lease with what sounds like a draconian clause?

HampshireH

Just because they can doesn't mean they will.

You will find this or similar in most leasehold properties.

If you aren't happy with the clause then leasehold probably isnt for you as no freeholder is going to remove this protection.

They would have a process to follow and it is highly unlikely you wouldn't be aware of any breaches let alone enforcement action.

cloo

Yes, it is standard, the same was so in our last place. Pretty par for the course with leasehold.

SmashedAvacado

the reason why they rarely enforce these clauses is that a tenant has the ability to claim the remedy of relief which basically means if the landlord attempts to terminate the lease and the tenant then pays up, the landlord can't terminate. Relief is a discretionary remedy of the court, but that being said, they will generally award it equitably where the landlord is made hole as against the obligation that has been breached.

Where the ground rent is above £200 outside of london and £1000 in london, this is more complicated, and you might want to seek some specialist advice as these leases may not be eliigable for the grant of relief.

Dawn299

The ground rent would remain below £1000 in London for the next 50 years so not too worried about that. Just curious what are the steps the landlord needs to follow in case they want to push for forfeiture in accordance with this clause?

Dawn299

The ground rent would remain below £1000 in London for the next 50 years so not too worried about that. Just curious what are the steps the landlord needs to follow in case they want to push for forfeiture in accordance with this clause? Also is the remedy of relief is anyway impacted by the invalidation of section 8, housing act 19888 as per this lease?

SmashedAvacado

you can't contract out of a right to claim relief.

You don't need to worry about how a landlord might seek to forfeit a long lease (and what you can do if that happens) - its a pretty unusual situation even with arrears of ground rent and is time to call for specific specialist advice. In the meantime, pay your ground rent and service charge and you have no fears.

myoption

I have exactly the same clause in my lease and, just like Dawn, find it totally unacceptable. The reason being this wording is at odds with Law and Property Act which requires Landlord to issue a s. 146 notice to a lessee first before commencing any proceedings (for any non-payment related breach). Secondly, according to s.166 of Leasehold Reform Act a Leaseholder is not required to make payment of Rent unless the Landlord has sent to them a notice + in order for forfeiture proceedings to commence for non-payment of rent the debt must be greater than £350.00 and outstanding for over three years. 
I have also been told by my solicitor that it's a standard clause but it doesn't make any sense if it contradicts the law. How is it going to work in practical terms and why is it stipulated this way if it can't be enacted the way it's written or can it?

bouicca21

It may be standard for new builds but I have no such clause in my lease.