Elizabeth Dwomoh takes a look at how landlords can validly forfeit a tenant’s lease under the Commonhold and Leasehold Act 2002
Key points
- A notice that is not in the prescribed form because it contains a minor discrepancy in the explanatory notes is not necessarily invalid
- Rent only becomes due on the date specified in the notice served under section 166 of the Commonhold and Leasehold Reform Act 2002. After the rent has become due a landlord’s right to forfeit only arises once the grace period afforded by the forfeiture clause has expired
In Cheerupmate2 Ltd v De Luca Calce [2018] EWCA Civ 2230; [2018] PLSCS 172 the Court of Appeal had to determine whether a landlord had validly forfeited its tenant’s lease in accordance with sections 166 and 167 of the Commonhold and Leasehold Act 2002 (the 2002 Act).
The statutory provisions
Under section 166 of the 2002 Act, a long leaseholder is liable to make a payment of rent once served with a notice by their landlord to do so (the section 166 notice). The section 166 notice must state the amount demanded and the date payment is due.
The payment date cannot be less than 30 days, and must be no more than 60 days after the date on which the section 166 notice was served. Furthermore, the payment date cannot be before the date the tenant would have been liable to pay rent in accordance with the terms of the lease.
The form of the section 166 notice is prescribed by subordinate legislation.
Section 167 of the 2002 Act bars a landlord’s right to forfeit when a tenant defaults on payment of rent in two respects: if the unpaid amount is less than £350; or consists of, or includes, an amount that has been outstanding for less than three years.
The purported forfeiture
Franco De Luca Calce was the tenant of a dwelling held under a long lease. The ground rent reserved under the lease was £2 per annum, payable by equal half yearly instalments.
Cheerupmate2 was Calce’s landlord. The lease contained a forfeiture clause that entitled Cheerupmate2 to forfeit if rent was in arrears for a period of two years after payment had fallen due.
On 12 March 2015, Cheerupmate2 sent Calce a section 166 notice. It required him to pay ground rent of £11 by 20 April 2015. The demand was said to be for the period 25 March 2010 to 25 March 2015. Calce defaulted on his payment. On 21 April 2015 Cheerupmate2 purported to forfeit the lease by peaceable re-entry.
The section 166 notice served by Cheerupmate2 was purported to be in the prescribed form in effect at the time. It was not. In April 2011, a “correction slip” had amended one of the explanatory notes in the prescribed form. The amendment made only served to clarify the information already provided.
The First-tier Tribunal and the Upper Tribunal (Lands Chamber) determined that Cheerupmate2 had not validly forfeited Calce’s lease. The tribunals found that the section 166 notice served was invalid as it was not in the prescribed form. Secondly, the purported forfeiture was premature. After payment fell due, Calce was deprived of the benefit of the two years’ grace period contained in the forfeiture clause. Thirdly, section 167 of the 2002 Act precluded Cheerupmate2 from forfeiting the lease for a period of three years from the date specified in the section 166 notice.
Was the notice invalid?
Relying on Natt v Osman [2014] EWCA Civ 1520; [2015] EGLR 11 and Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89; [2017] PLSCS 46, the Court of Appeal found that the minor discrepancy between the section 166 notice served by Cheerupmate2 and the prescribed form was not sufficiently important to invalidate the notice.
Elim Court confirmed that the intention of the legislature as to the consequence of non-compliance with statutory procedures is to be ascertained in light of the statutory scheme as a whole. Where information in a notice is missing and of critical importance in the context of the scheme the non-compliance with the statute would ordinarily invalidate the notice.
Two useful pointers were whether the information required was particularised in the statute, or required by the statute itself as opposed to subordinate legislation. If required by subordinate legislation the information was likely to be viewed as of secondary importance.
In the present case the discrepancy between the section 166 notice and the prescribed form concerned only the clarity of the information provided, and not its substance.
The section 166 notice served by Cheerupmate2 contained all the information required by the 2002 Act. The amendment to the explanatory note was made by way of a correction slip rather than an amending set of regulations – the inference being that the amendment was regarded as not altering the substance of the note. Furthermore, the explanatory notes were plainly subordinate to the purpose of the notice.
When does time start to run?
The forfeiture clause in the lease enabled Cheerupmate2 to forfeit only when rent was in arrears two years after it had fallen due. Section 166(1) of the 2002 Act clearly provided that rent only became due when the landlord had given notice relating to payment.
The court found that section 166(4) of the 2002 Act changed the legal effect of provisions in the lease relating to non-payment or late payment of rent. Time only started to run after the date specified for payment in the section 166 notice. After payment fell due, Cheerupmate2’s right to forfeit only arose on expiry of the two years’ grace period afforded by the forfeiture clause.
Cheerupmate2’s purported re-entry was premature and unlawful. In light of this finding, the court refused to consider whether, on a proper construction of section 167 of the 2002 Act, a landlord was precluded from forfeiting for a period of three years from the date of a valid section 166 notice.
Elizabeth Dwomoh is a barrister at Lamb Chambers
