Last week saw yet another news story focusing on leasehold unfairness. On this occasion, the news reported on Charles McCadden and the forfeiture of his north London flat stated to be worth £600,000.
Mr McCadden purchased his property outright in 2016 using inheritance funds. He subsequently carried out substantial renovations including fitting a new bathroom, kitchen and central heating system. Unfortunately, Mr McCadden did not seek the freeholder’s permission to carry out any of the works in direct breach of his lease.
Dr Asfan Malik, the freeholder who lived in the flat below Mr McCadden, issued proceedings in the First-Tier Tribunal for a declaration that Mr McCadden had breached the terms of his lease. Mr McCadden failed to grant the Tribunal access to inspect the flat seemingly on several occasions and otherwise did not engage in the proceedings. When the Tribunal attended the property, however, it could see that holes had been drilled into the external walls to service the new flues, but that redundant holes from the old flues remained. The Tribunal also found that Mr McCadden had rendered the front wall of the property. The external walls were not part of Mr McCadden’s demise and he had no right to make any alterations to them.
In Mr McCadden’s absence, the Tribunal found that the lease had been breached in that Mr McCadden had made structural alterations without Dr Malik’s consent. Furthermore, he had caused nuisance to Dr Malik, presumably during the course of the works, and also owed to Dr Malik service charges.
Dr Malik thereafter looked to forfeit the lease on the basis of Mr McCadden’s breach of covenants. Unfortunately, Mr McCadden did not engage with those proceedings either and the order for forfeiture was granted. Mr McCadden’s lease was terminated and reverted back to Dr Malik as the landlord. Dr Malik is now at liberty to create a new lease, sell the same, and retain the proceeds of sale. She will no doubt receive a substantial windfall.
What Mr McCadden could have done, perhaps even after enforcement of the forfeiture order, was apply to the Court for relief. It is likely that any such application would have been granted if he agreed either to reinstate the works or to otherwise compensate Dr Malik for having carried out the works wrongfully. Unfortunately, Mr McCadden failed to engage in the proceedings and suffered substantial losses.
Forfeiture is certainly a draconian remedy, but remains an extremely useful tool for landlords with defaulting lessees and is therefore threatened often. In practice, it is a relatively long, drawn out and costly process fraught with potential problems. Tribunal proceedings to ascertain whether or not the breach has occurred can typically take 4-6 months and the forfeiture proceedings thereafter in the county court can take much longer. Only in relatively extreme situations will an order for forfeiture be granted.
Having said that, there are now calls for the law on forfeiture to be revised to ensure that landlords do not receive such a windfall at the expense of the defaulting leaseholder. Only parliament can legislate for such an amendment and that is not going to happen any time soon.
In the meantime, lessees need to read their leases carefully, make sure they are fully aware of their obligations, and never ignore a landlord/tenant issue that arises.