Forfeiture of a residential lease for non-payment of ground rent

What is ground rent, and how does it work?

Ground rent is a fee a leaseholder must pay to the freeholder as a condition of their lease for the land their home is on. Not every lease will incur ground rent, but a long lease usually will. The amount is often nominal and subject to rise after a percentage of the lease term has elapsed. 

More modern properties will likely incur a higher rate of ground rent (£250- £500 per annum), whereas most ex-local authority properties will have a ground rent as low as £10 per annum. 

Your legal advisor will make the necessary enquiries when you are purchasing the property to attain details of the amounts and how it is payable and make sure there are no arrears payable, amongst other enquiries. 

What is forfeiture of ground rent, and what action can landlords take?

The freeholder can take action if you do not pay your ground rent. The freeholder can apply to the court to either recover the money owed or, importantly, repossess the property. The landlord can only start forfeiture action if the leaseholder:

1. has been in arrears for three years or more, or
2. owes £350 or more in ground rent (or a combination of ground rent, services charges and administration charges)

Relief from forfeiture

Where a landlord seeks to end a lease for non-payment of ground rent, the tenant can apply to the court for relief, that is, to have the forfeiture set aside. 

The court has the discretion to grant or withhold relief, which is generally exercised in favour of the tenant if the tenant acts quickly, pays any arrears, remedies any covenant breaches, and pays the landlord’s costs.

Each case is decided on its merits. However, the recent case of Golding v Martin [2019] EWCA Civ 446 made it clear that the right to set aside a forfeiture claim is very favourable to the leaseholder.

Golding v Martin [2019] EWCA Civ 446

In this case, the leaseholder moved abroad, leaving the property vacant and did not give the landlord a forwarding address. The service charge was unpaid, and under the terms of the lease, it was liable to forfeiture if unpaid for 21 days. 

In this case, the service charge demand left unpaid amounted to £11,794.66. The defendant cleared this outstanding amount, and the court ruled that the existence of the right to relief from forfeiture therefore amounts to a prospect of success at trial.

Good to know

If a leaseholder extends their lease under the Leasehold Reform Act 1993, the ground rent becomes what is known as a ‘peppercorn rent’. This means that effectively the lessee no longer has to pay ground rent to the freeholder.

Expert legal advice

SO Legal has solicitors in London, Brighton, Eastbourne, Hastings, and Uckfield, providing support in all areas of property law.