Appellant withholding rent and service charges — Landlords claiming possession by forfeiture — Section 81 of Housing Act 1996 — Forfeiture on ground of dispute over service charges forbidden by statute — Appeal allowed in part
The appellant was the lessee of premises that were in a serious state of disrepair. From 1992, she withheld payment of ground rent and service charges, and, in 1993, she commenced proceedings for breach of the repairing covenant. In 1996, the respondent landlords served her with a notice under section 146 of the Law of Property Act 1925, claiming that she was in breach of covenant in failing to pay the service charges and ground rent. They subsequently amended their defence to add a counterclaim, seeking judgment for the arrears of ground rent and service charges and claiming possession of the flat by forfeiture. Service of the counterclaim amounted to re-entry. The appellant claimed relief from forfeiture and raised the issue of the reasonableness of the service charges. The judge found for the appellant but gave judgment for the second respondent on the counterclaim.
The appellant challenged that finding on the ground that section 81 of the Housing Act 1996 had come into force between the service of the section 146 notice and the service of the amended defence and counterclaim. Section 81 held that a landlord could not exercise a right of forfeiture or re-entry for failure to pay service charges if the amount was in dispute. Accordingly, she claimed that re-entry by the respondents on the basis of her failure to pay the service charges was forbidden by statute. She also challenged the landlord’s ability to recover service charges as a money judgment, whether as a contractual payment under the lease or as an element of mesne profits after re-entry.
Held: The appeal was allowed in part.
Re-entry for failure to pay service charges was forbidden under section 81 of the 1996 Act, which meant that re-entry and forfeiture effected by service of the counterclaim in 1996 was upon the ground of arrears of the ground rent only. In those circumstances, the appellant was not liable to pay the outstanding service charges and should have been limited to the payment of ground rent in arrears and the costs of the counterclaim in respect of the ground rent only.
Christopher Semken (instructed by Dean & Dean) appeared for the appellant; Howard Lederman (instructed by Bell Dening) appeared for the respondents.
Vivienne Lane, barrister
