A money claim does not waive right to forfeit

Pursuit of a money claim for service charges is not a waiver of the right to forfeit for those service charges. In Clemente v Mindmere Ltd [2024] UKUT 50 the Upper Tribunal (UT) considered whether issuing proceedings in the county court for payment of ground rent and service charge waived a freeholder’s right to forfeit a lease for non-payment of the same. The appellant was the long lessee of Flat 7 154 Gloucester Terrace W2 and a shareholder in the respondent freeholder. His lease contained a covenant (“the costs of forfeiture covenant”) under which he agreed “to pay all costs charges and expenses (including Solicitors’ costs and Surveyors’ fees) incurred by the Lessor for the purpose of or incidental to the preparation and service under Section 146 and/or 147 Law of Property Act 1925 notwithstanding forfeiture may be avoided otherwise than by relief granted by the Court”. The respondent commenced county court proceedings for service charges, reserve fund contributions and ground rent. The claim was transferred to the First Tier (Property) Tribunal. At the conclusion of the matter the FTT considered the costs incurred by the respondent and determined that £15,563 would be reasonable and payable by the appellant if demanded as an administrative charge under the costs of forfeiture covenant. The appellant appealed arguing that by issuing the money claim the respondent had waived its right to forfeit and therefore it could not have the benefit of the costs of forfeiture covenant. The appeal was dismissed. Section 81 Housing Act 1996 means that where service charges have not been paid, in breach of covenant, a landlord cannot proceed straight to the service of a section 146 notice as a prelude to forfeiture proceedings. If the sums have not been admitted the freeholder must obtain a decision from the court or tribunal that the sums are payable. While this is usually by way of a declaration the UT held that it is equally open to the landlord to apply to the County Court for a money judgment. Such a claim does not waive the right to forfeit. Although this point had not been previously decided the UT found support in other authorities. In Cussens v Realreed Ltd [2013] EWHC 1229 (a case concerning s81 and also the corresponding provision for breaches other than service charge – s168 Commonhold and Leasehold Reform Act 2002) the Court of Appeal had not regarded an action for damages in that context as a waiver of the right to forfeit. It observed: “The determinations of breach … are effective under s168 of the 2002 Act, just as they would have been had the landlord (as it could have done) claimed damages (whether nominal or not) for the tenant’s breach of the covenants or sought an order to restrain them.” In London Borough of Tower Hamlets v Khan [2022] EWCA 831 a freeholder had pursued the same course as the respondent and there no had been no suggestion by or to the Court of Appeal that issuing the county court money claim had waived the right to forfeit. Elizabeth Haggerty is a barrister