Coronavirus and Leasehold Properties

Posted on 30th September 2020

In March 2020, emergency legislation helped to assist with the Covid-19 Pandemic situation that faced many of those in rented accommodation. However, no such assistance was given to leaseholders to assist with payment of their service charges, ground rent or payments arising from their leases. Many homeowners have found difficulties, and are likely to still face further difficulties in complying with their leasehold obligations as set out in their leases. In the absence of any legislative changes or concessions, many homeowners are worried about losing their home or investment property.

Unlike tenants of short term lets such as Assured Shorthold Tenancies, whereby the emergency legislation extended notice periods, as well as applying a stay to possession proceedings, this has not been extended to long leaseholders, and so early communication with your Freeholder and Management Company is vital to avoid the loss of your home, and to try and avoid court proceedings and the consequent escalation of costs.

Many have faced changes in their employment status or income which has made payment of service charges and ground rent impossible or caused significant hardship. In addition, leaseholders have felt aggrieved due to the lack of compliance by their Freeholder where social distancing requirements, or staff absences due to self-isolation have made the performance of the Landlords obligations somewhat obsolete and impossible to undertake.

Other leaseholders have found their Landlords levying the costs associated with the Health and Safety measures, and provisions of PPE to them as leaseholders and naturally have found those to be a surprise and further unaffordable cost.

What to do if you cannot afford to pay

Should you find yourself in financial difficulties or unable to pay your service charge or ground rent, you are at risk of proceedings being initiated against you, and so it is key and highly important to communicate with your landlord or managing agent, and to try and seek payment plans, deferments, or adjusting the frequency of pay.

If you find demands being sent that are not reasonably incurred, or in the absence of formal service charge demands or without consultation, or simply that you cannot afford to pay your service charges or ground rent, contact our offices as we may be able to assist.

Our Property Dispute Team will be able to consider your lease to see whether or not these charges are payable, and whether you have further recourse to challenge.

Possession of your property

If you breach a term of your lease, then your Freeholder can start possession proceedings against you for breach of lease. Some breaches can be remedied and others cannot. For example if your lease prohibits you from changing its composition, and you have then this is a clear breach, or if you fail to pay your service charges, ground rent or administration fees.

Your Freeholder will be entitled to apply for possession of the property if your lease permits forfeiture. In order for your landlord to forfeit your lease, there has to be a provision within your lease which permits this. In order for the Freeholder to seek forfeiture, there has to be a determination that service charges or rent payments have not actually been made, and this determination is carried out by the court. However, any such amount must be greater than £350 or has been outstanding for more than three years. Before serving a notice on you, you will have to admit that you have breached the terms of the lease or a court or tribunal will have to determine this.

In order for the Freeholder to commence forfeiture proceedings other than non-payment of rent, or service charge – you must be served with a section 146 notice which will give you the opportunity to remedy the breach. A section 146 notice is like a warning notice, and must advise you what the breach is, the requirement for you to remedy the breach and whether any compensation is due.

In order for the Freeholder to proceed to forfeit the beach, the breach will have to either be admitted by you or be proven. If you receive a section 146 notice, you would be required to remedy the breach and pay the compensation if relevant.

Even if the breach has been established, the Freeholder is not able to repossess without a court order.

Some Freeholders write directly to your mortgage lender rather than seeking possession as very often Lenders will want to secure their interest in your property, and will pay the debt and then add it onto your mortgage debt, which will of course accrue interest.

How can you stop possession?

A leaseholder has a right to try to stop the forfeiture from taking place if he can demonstrate that the Freeholder has waived his right to do so. The waiver can be express, so there is an expressed agreement for the Forfeiture to stop or it can be implied, whereby the Landlord has waived their right to forfeit. Examples of waiver would be when your landlord accepts rent or acknowledges the existence of your lease.

Therefore, if you feel that your service charges are unaffordable, or unreasonable or have received demands for payment, or notices due to breaches of Lease arising out of your financial hardship caused by the Coronavirus Pandemic, contact our Property Dispute team who will be able to advise you on your rights, consider the terms of your lease and try to assist you to try and keep hold of your property. Call 0808 231 6369 or request a call back online.

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