Forfeiture of a Lease: The Hurdles and Relief Explained

Forfeiture is the landlord’s right to bring a lease to an end early because the leaseholder has broken it. If it runs its course the lease is destroyed, the flat reverts to the freeholder, and the mortgage lender loses its security, with nothing payable to the leaseholder for the value taken. Parliament has therefore stacked statutory hurdles in front of it, and forfeiture for service charge arrears is very rare. In almost every case the money is paid and the lease survives.

What Forfeiture Is, and Why It Is the Ultimate Sanction

The right does not exist unless the lease creates it. Almost every long residential lease contains a proviso for re-entry if rent or other sums stay unpaid for a stated number of days, or if the leaseholder breaks a covenant. Whether service charge is reserved as rent, and how many days of default the proviso needs, varies from lease to lease, so read the clauses in your own lease that matter first.

What sets forfeiture apart from a debt claim is the mismatch between debt and remedy. A money judgment recovers the sum owed. Forfeiture recovers the flat, and if unrelieved hands its whole value to the freeholder.

Section 2 of the Protection from Eviction Act 1977 also makes it unlawful to enforce a right of re-entry or forfeiture over premises let as a dwelling other than by court proceedings while any person is lawfully residing there. For an occupied flat, forfeiture means a county court possession claim.

Hurdle One: The Debt Has to Be Big Enough or Old Enough

Section 167(1) of the Commonhold and Leasehold Reform Act 2002 says a landlord under a long lease of a dwelling may not exercise a right of re-entry or forfeiture for failure to pay rent, service charges or administration charges, or a combination, unless the unpaid amount exceeds a prescribed sum or includes an amount payable for more than a prescribed period.

In England those figures come from the Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004, in force from 23 November 2004: regulation 2 prescribes £350 and three years. Wales has a separate instrument of 2005 prescribing the same figures.

Section 167(3) strips out any default charge, meaning an administration charge levied because the leaseholder failed to pay, when testing whether the £350 is exceeded, so late payment fees cannot push arrears over the threshold. Section 167(2) caps the prescribed sum at £500. The £350 is often quoted as though it were typical: it is the floor below which forfeiture is banned outright, and clearing it only gets a landlord to the start.

Hurdle Two: Someone Independent Has to Decide the Money Is Owed

Section 81 of the Housing Act 1996 does most of the work in service charge cases. A landlord may not, in relation to premises let as a dwelling, exercise a right of re-entry or forfeiture for failure to pay a service charge or an administration charge unless the appropriate tribunal, a court or an arbitral tribunal has finally determined that the amount is payable, or the tenant has admitted it.

Section 81(4A) closes the obvious gap: serving a notice under section 146(1) of the Law of Property Act 1925 counts as exercising the right, so sending one before a determination exists is itself forbidden.

Section 81(2) adds a waiting period: the landlord may not act until after the end of the period of 14 days beginning with the day after the final determination is made. Sections 81(3) and (3A) fix that point at the expiry of the time for appealing, or at the disposal of an appeal that is determined, abandoned or otherwise ceases to have effect. In England the appropriate tribunal is the First-tier Tribunal.

Section 27A of the Landlord and Tenant Act 1985 lets either side apply to that tribunal for a determination of whether a service charge is payable and, if so, by whom, to whom, how much and when. Paragraph 5 of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 does the same for administration charges. Both add that a tenant is not to be taken to have agreed or admitted any matter by reason only of having made a payment, so a leaseholder who disputes the bill should make a section 27A application rather than simply withhold.

Ground rent sits outside section 81 but has its own gate. Section 166 of the Commonhold and Leasehold Reform Act 2002 makes a tenant under a long lease liable for rent only if the landlord has given a notice in the prescribed form, with a payment date not less than 30 days and not more than 60 days after the notice, and not earlier than the lease date. Arrears never validly demanded are not arrears, a point worth checking alongside what makes a service charge demand valid.

Hurdle Three: Breaches That Are Not About Money

Unauthorised alterations, unlawful subletting, a pet kept against covenant: these run through section 168 of the Commonhold and Leasehold Reform Act 2002, in force in England from 28 February 2005. A landlord may not serve a section 146 notice for breach of a covenant unless it has been finally determined on an application under section 168(4) that the breach occurred, the tenant has admitted it, or a court or arbitral tribunal has determined it. Section 168(3) imposes the same 14 day wait.

One point causes constant confusion. Section 169(7) states expressly that nothing in section 168 affects service of a section 146 notice for failure to pay a service charge or an administration charge. Sections 81 and 168 are alternative gates, not cumulative: money owed goes through section 81, other breaches through section 168.

Disrepair Inside a Flat Is Harder Still

Where the breach is of a covenant to keep the property in repair, the Leasehold Property (Repairs) Act 1938 adds a layer. It applies to leases of seven years or more (section 7(1)). If three years or more of the term remain unexpired when the section 146 notice is served, section 1(1) gives the leaseholder 28 days to serve a counter-notice claiming the benefit of the Act, and section 1(4) invalidates the notice unless it says so as conspicuously as the rest. A counter-notice then forces the landlord to seek leave of the court, given only on one of five grounds in section 1(5).

The Section 146 Notice, and What It Costs

Section 146(1) of the Law of Property Act 1925 says a right of re-entry or forfeiture for breach of covenant is not enforceable unless the landlord serves a notice specifying the breach, requiring it to be remedied if it is capable of remedy and requiring compensation in money, and the leaseholder then fails within a reasonable time to do both.

Section 146(11) carves out rent: the section does not affect the law on re-entry, forfeiture or relief for non-payment of rent, so a landlord forfeiting purely for rent arrears serves no section 146 notice. Section 167 still applies, and where the sums are service charges within section 18(1) of the Landlord and Tenant Act 1985, section 81 applies whatever the lease calls them.

Cost is a live issue. Section 146(3) lets a landlord recover as a debt all reasonable costs properly incurred through a solicitor, surveyor or valuer in reference to a breach that is waived at the leaseholder’s request or from which the leaseholder is relieved. Passed on, those costs are usually administration charges within paragraph 1(1)(c) or (d) of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, so paragraph 2 makes them payable only so far as reasonable and paragraph 5 lets the tribunal rule on them.

Relief from Forfeiture

Relief is why forfeiture so rarely finishes. Section 146(2) of the Law of Property Act 1925 gives the court a broad discretion: it may grant or refuse relief having regard to the proceedings, the conduct of the parties and all the other circumstances, on such terms as it thinks fit. For rent arrears section 138 of the County Courts Act 1984 is largely mechanical: pay, and the lease continues.

The last row is the one directors underestimate. Forfeiture destroys the mortgage lender’s security along with the lease, so the lender has both an interest in stopping it and standing to seek a vesting order. In practice it commonly settles the arrears and adds them to the mortgage account. The building gets its money and the lease survives.

What Actually Happens with Service Charge Arrears

Set against that machinery, the realistic sequence for an RMC or RTM company chasing arrears looks nothing like eviction.

1. A valid demand, reminders, then a formal letter before claim.
2. If still unpaid, either a county court money claim, or a First-tier Tribunal application under section 27A where payability or reasonableness is disputed.
3. A judgment or determination, after which the debt is enforceable like any other judgment debt.
4. Only if that fails, and only where the arrears clear the section 167 threshold, does forfeiture come into view: the section 81 determination, the 14 day wait, a section 146 notice where needed, then a possession claim the leaseholder or lender can defeat by paying.

The Regulatory Policy Committee opinion on the draft reform Bill notes that forfeiture activity is highly concentrated, with only a very small number of cases completed each year. Forfeiture is not an arrears recovery tool. It is a pressure point, and its value lies in the fact that a lender usually intervenes first.

Threatening forfeiture before any determination exists is not just aggressive, it invites the argument that section 81 has been breached. A realistic bad debt allowance in the way the block’s service charge money is handled, and steady recovery through the ordinary debt route, protects the other leaseholders far more reliably.

Start with the paperwork. Check the sums were validly demanded and that you could defend them as reasonable before a tribunal. Then decide whether you are pursuing a debt or a dispute: a debt goes to the county court, a dispute to the tribunal under section 27A. Minute the decision, because acting consistently between leaseholders is part of what company law expects of RMC directors.

If you are a director in Devon or Cornwall weighing up an arrears case, Plymouth Block Management can go through the lease, the demand history and the options with you. Our management fee is fixed and agreed in advance and we take no commission on contractor invoices, so nothing in the advice turns on the route you choose. Speak to us if that would help.

What Is Changing

The Leasehold and Freehold Reform Act 2024 did not touch forfeiture. Its nine Parts cover leasehold houses, enfranchisement, the right to manage, service charges, insurance, administration charges, litigation costs, estate management, redress schemes, rentcharges and Part 5 of the Building Safety Act 2022. Forfeiture was left out, worth remembering when reading which parts of the 2024 Act are in force.

The draft Commonhold and Leasehold Reform Bill was published on 27 January 2026 for pre-legislative scrutiny, the Housing, Communities and Local Government Committee opened its review on 4 February 2026, and the GOV.UK page was last updated on 19 March 2026. The government describes the package as including abolition of residential forfeiture and its replacement with a statutory lease enforcement regime, alongside the move to commonhold.

It is a draft. It has not been passed and the replacement regime is not settled, so everything above is still the law.

Common Questions

The points that come up most often once forfeiture is mentioned.

Sources

Everything above is taken from these, not from a summary of them:

1. Housing Act 1996, section 81: Restriction on termination of tenancy for failure to pay service charge legislation.gov.uk
2. Commonhold and Leasehold Reform Act 2002, section 167: Failure to pay small amount for short period legislation.gov.uk
3. Commonhold and Leasehold Reform Act 2002, section 168: No forfeiture notice before determination of breach legislation.gov.uk
4. Commonhold and Leasehold Reform Act 2002, section 169: Section 168 supplementary legislation.gov.uk
5. The Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004 legislation.gov.uk
6. The Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (Wales) Regulations 2005 legislation.gov.uk
7. Law of Property Act 1925, section 146: Restrictions on and relief against forfeiture of leases and underleases legislation.gov.uk
8. County Courts Act 1984, section 138: Provisions as to forfeiture for non-payment of rent legislation.gov.uk
9. County Courts Act 1984, section 139: Service of summons and re-entry legislation.gov.uk
10. Protection from Eviction Act 1977, section 2: Restriction on re-entry without due process of law legislation.gov.uk
11. Landlord and Tenant Act 1985, section 27A: Liability to pay service charges: jurisdiction legislation.gov.uk
12. Commonhold and Leasehold Reform Act 2002, Schedule 11: Administration charges legislation.gov.uk
13. Leasehold Property (Repairs) Act 1938, section 1 legislation.gov.uk
14. Leasehold and Freehold Reform Act 2024: contents legislation.gov.uk
15. Draft Commonhold and Leasehold Reform Bill GOV.UK
16. RPC opinion: impact of draft Commonhold and Leasehold Reform Bill GOV.UK
17. Leasehold Property (Repairs) Act 1938, section 7: Application of Act legislation.gov.uk

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