Real Estate Dispute Resolution Team writes in The Observer
Below is a summary of Liberty Chappel’s reply to a reader’s question featured in The Observer on Sunday 14 January 2018.
I read with interest an article you’d written about landlords demanding ground rent and being able to claim six years’ worth providing they complete the appropriate demand form correctly.
My leaseholder has demanded this of me too but my question is – which I can’t seem to find a definitive answer to – are they in breach as they haven’t sent invoices/demands annually in the first instance or is this irrelevant if they have done it all in one go backdated six years with the correct form?
It would seem to me that they ought to have demanded/invoiced annually rather than waiting for six years (at best irresponsible administration?) but there doesn’t appear to be a rule that sets out their obligation in this regard (that I can find). Therefore I’m assuming I have to pay and can’t complain they didn’t invoice annually (which would seem a better way to go about things) or is there a rule about landlords sending timely demands/invoices?
Any help you could give me would be gratefully appreciated.
At the risk of being as evasive as our current world leaders, the short answer to the question is “It depends on the terms on your lease.” Having said that, I expect the position is that the ground rent, unlike service charge, will be payable on the dates set out in the lease, whether or not it has been formally demanded.
However, a landlord, under a lease for a term of 21 years or longer, must complete a form in respect of any unpaid ground rent before such rents are lawfully due. Section 166 of The Commonhold and Leasehold Reform Act 2002, sets out the prescribed form that landlords must use in order to properly demand unpaid ground rent. There are a number of things that the notice must contain, including but not limited to the amount due and the date on which payment must be made. From the facts of this question, it appears that the landlord has already complied with these obligations and the real question is “for what period can the landlord serve such demands retrospectively?”.
Essentially a landlord’s entitlement to rent is a contractual right and therefore the normal limitation periods, as set out in the Limitation Act 1980, apply. Assuming, in the circumstances where the leasehold interest in question is for a term of 21 years or more, that a valid s166 demand has been served, the limitation period for contractual claims, which a claim for unpaid ground rent would be, is 6 years. It should be noted that a landlord’s failure to serve a valid s166 demand does not extinguish a landlord’s right to the ground rent but simply postpones the landlord’s ability to recover it until such time as the demand is validly served albeit subject to the 6 year rule set out above.
By not paying the rents due under the lease a tenant is at risk of the landlord taking steps to forfeit the lease. It is open to a landlord to pursue forfeiture proceedings in circumstances where the unpaid ground rent exceeds £500.00 or, where the amount outstanding is less than £500.00 but has been outstanding for more than 3 years.
Where there has been substantial delay by the landlord in taking steps to enforce the terms of the lease, I expect that a tenant would be able to successfully apply for relief from any such action on the basis that he/she agrees to pay what is properly due. A long lease is an incredibly valuable asset and a tenant will most likely not want to run the risk of losing on a point of principle. It is frustrating for a tenant when a landlord doesn’t demanded the rent annually, as this is most likely to be considered good practice, but that act, or omission, alone is not a basis on which a tenant can withhold ground rent.
The true position will depend on the terms of the lease. A tenant should consider taking legal advice if they intend to contest that the ground rents are due.