This article was first published in Lexis PSL Property
What is the process and time limit for seeking a relief from forfeiture by consent of a long leasehold interest of a residential property?
In the case of forfeiture of a residential lease, the re-entry or forfeiture must be effected by legal proceedings, rather than physical re-entry.
Before seeking to enforce a right of forfeiture, the landlord must serve a section 146 of the Law of Property Act 1925 (LPA 1925) notice, except where the breach is non-payment of rent or one of the cases specified in LPA 1925, s146(8)(ii).
Further, in the case of a long lease, a landlord may not serve a section 146 notice unless the tenant has admitted the breach, or it has been finally determined in legal or arbitral proceedings that the breach has occurred (See section 81 of the Housing Act 1996 (HA 1996), (as amended by section 170 of the Commonhold and Leasehold Reform Act 2002 (CLRA 2002) and Transfer of Tribunal Functions Order 2013, SI 2013/1036), as regards failure to pay a service charge or an administration charge (see CLRA 2002, ss168 and 169 as regards with other breaches).
For more information, see Practice Notes: Landlord—when can I forfeit? and Section 146 notices and waiving the right to forfeit.
The need for an application
Relief from forfeiture is a discretionary remedy, which can only be granted by the court, by the making of a court order. This can be achieved by approving a consent order. If the landlord agrees to allow the tenant to remain in the property after forfeiture, without an application to the court, this will amount to the grant of a new lease. Accordingly, in order to preserve and continue the existing lease, an application to the County Court or the High Court and a court order are required (see Zestcrest v County Hall Green Ventures). Zestcrest was a case concerned with a commercial lease in which forfeiture had been effected by peaceful re-entry, and the landlord had a real fear that a new tenancy under Part II of the Landlord and Tenant Act 1954 (LTA 1954) would arise. However, the same reasoning would apply to residential leases. Once possession proceedings have been issued, the landlord of a residential lease has forfeited the residential lease. Following the reasoning of Zestcrest, once the forfeiture has occurred and the lease has come to an end, to prevent a new lease arising, relief from forfeiture must be obtained by application to the courts.
For further information, see Practice Notes: Claiming relief from forfeiture when breach is rent arrears and Claiming relief from forfeiture for any breach other than rent arrears.
Application for relief before proceedings
The tenant, subtenant or mortgagee may apply to the court for relief from forfeiture at any time after service of the notice under LPA 1925, s146.
LPA 1925, s146(13) gives the County Court jurisdiction to deal with these applications. This is in addition to the jurisdiction of the High Court.
Service of a section 146 notice does not amount to forfeiture and the proposed parties would be able to agree a consent order in relation to the continuation of the lease and the grant of relief from forfeiture, in that situation. This would need to occur prior to issue by the landlord of possession proceedings on grounds of forfeiture.
Application for relief after proceedings issued
An application for relief from forfeiture can be made by the tenant bringing their own relief application (see Precedent: Particulars of claim for relief against forfeiture) or counterclaim in the landlord’s action.
There is a claim form for relief against forfeiture, the N5A Claim Form for relief against forfeiture, which must be completed by the tenant. The tenant will be required to provide Particulars of Claim either on the N5A or to attach it to the claim form.
Alternatively, a claim for relief from forfeiture may be made by counterclaim.
The application for relief can be made under LPA 1925, s146(2) at any time before the landlord has entered into possession under a possession order. It is only where the possession order is set aside or reversed on appeal, that relief could be granted after a landlord has re-entered.
In FiveCourts Ltd v JR Leisure Development Co Ltd, the parties signed a consent order after proceedings had been issued, which provided that the tenant should have relief from forfeiture, on certain terms. The court held that it did have jurisdiction, in exceptional cases, to vary a consent order for relief from forfeiture.