No relief and unbalanced windfalls

Timbo v London Borough Of Lambeth (2019) EWHC 1396 (Ch)

This is another in our occasional series of cases where residential leaseholders have had their leases forfeited and not obtained relief from forfeiture.  (For other examples, see here, and here). As with the previous examples, this is something of a catalogue of things leaseholders really, really, really shouldn’t do, but seem to have put some effort into doing anyway.

Ms T was the leaseholder of a flat, Lambeth were the freeholder (An RTB lease from 1990, bought by Ms T and her then husband in 2009 for £175,000).

Mr and Ms T (married) did not live in the flat from 2010, if indeed they had before. They went to live in Sierra Leone.

On the limited evidence before me, the claimant (Ms T) says that in 2010 Geoffrey was left to manage the flat because the claimant and her husband had returned to live in Sierra Leone. I do not know who Geoffrey is, indeed, the claimant does not know who Geoffrey is. He has played no part in these proceedings or as far as I am aware the proceedings in the County Court.

No service charges were paid. In 2012 and in 2015 Lambeth obtained money judgments in default and then a charging order for unpaid charges totalling £4,235.83.

There was, apparently, a visit by letting agents in 2017, who found tenants in the flat. No detail of who and how much rent they paid was forthcoming from Ms T.

In March 2017, Lambeth obtained a further judgment for service charges and costs totalling £3,567.02. Nothing had been paid on previous judgments. In April 2017, Lambeth served a s.146 notice on the flat.

Apparently in April 2017, Mr T died. This was not communicated to Lambeth for quite some time. On 24 May 2017 Lambeth issued possession proceedings, thereby forfeiting the lease. A possession order was made on 3 August 2017 and a warrant of possession executed by the bailiff on 27 October 2017.

Lambeth then used the flat as temporary accommodation for those it had a homeless duty to accommodate.

Ms T asserted that she applied for relief from forfeiture on 31 January 2018. That was not issued and, Ms T said, the application was returned by the court on 16 February 2018 because the fee was incorrect. However, Ms T had on 7 February applied to set aside the possession order, on the basis that she was unaware of the proceedings. This came for hearing in April, but Ms T did ot attend, having not been served with notice of the hearing. The hearing was relisted for June 2018, but in the meantime, Ms T attempted to serve notice of discontinuance in the proceedings. The June hearing went ahead and the application was dismissed, Ms T not attending.

The explanation available from Ms T about this course of action was not clear:

There is very little information from the claimant as to why this approach was taken and why she did not seek to take positive steps at a much earlier stage to apply for relief. What is said in Mr Timbo’s witness statement, which is all that I have before me, at paragraphs 1.16 and 1.17, is:

“1.16 Upon receipt of the order and due to the claimant’s expectation of amicable resolution with the defendant respondent without reverting to court, the claimant attempted to file a notice of discontinuance. This was done by the incorrect form and therefore was ineffective.

It appears that Lambeth and Ms T were talking at this point, but the terms of any relief, and specifically how much Ms T would have to pay remained in dispute. A number of offers were made by Ms T’s newly instructed solicitors in July 2018.

Eventually, on 26 July 2018, Ms T applied for relief from forfeiture in the High Court

When the application reached hearing, things continued to be less than straightforward:

This claim is pursued by Mr Timbo on behalf of the claimant, and I am told that he holds a general power of attorney on her behalf.

The claimant relies on a witness statement with a statement of truth signed by Mr Timbo on 9 March 2019. A signed copy was provided to me at the hearing on 13 March 2019 and today I have been handed a photocopy of Mr Timbo’s Barclays Bank statement showing that, as at 29 March 2019, so that is just over a month ago, there was a balance in that account of £22,204.18. The claimant’s position is that this sum, held in Mr Timbo’s bank account, will meet the sums outstanding in this case and therefore would be sufficient to meet any terms that I might impose as a condition of relief.

However, Ms T did have counsel on a direct access basis.

The immediate problem for Ms T was section 210 of the Common Law Procedure Act 1852, which restricted applications for relief from forfeiture on grounds of arrears to a period of 6 months from the date of forfeiture. As per Gibbs v Lakeside Developments Limited [2018] EWCA Civ 2874 (our report) the High Court’s equitable jurisdiction must be exercised with due regard to that restriction.

Ms T’s counsel bravely tried to argue that the 6 months ran from the date Ms T’s application to set aside the possession order was dismissed, in June 2018. This did not go well:

(Counsel for Ms T) sought to argue that, if there was any time constraint in relation to this application, as it would be in the County Court where six months was applicable, then this claim was brought in time. She sought to argue that time did not start running for the purposes of seeking relief until the claimant’s application in the County Court had been finally determined, which she says was 26 June 2018. On that analysis, of course, the claim would have been brought in time. But despite some questioning by me, counsel was unable to advance any credible legal analysis to support that submission.

The High Court found that the date of forfeiture (which was not re-entry because of the requirement to go through possession proceedings) was the date of service of the possession claim, at some point in May 2017. Service had been effected in accordance with the lease, on the property.

It was possible for the equitable jurisdiction to overrule the 6 month limit, but, per Gibbs, regard must be had to it, so clear reason for delay beyond that point advanced.

In this case, there had been an attempted application for relief in January 2018 (outside of time, but not so far out of time) but that had been abandoned. Although Lambeth had treated the later application to set aside the possession order as de facto an application for relief, that had been dismissed and Ms T had attempted to discontinue it anyway. Her reasons for doing so – discussions with Lambeth about relief – were not a good reason for delay:

Having been taken through the correspondence by both counsel it is clear that whilst the parties did correspond and the claimant’s solicitors sought to agree a payment by instalments there remained a fundamental issue between them as to the amount to be paid. I also note that the defendant had filed evidence in the county court treating the claimant’s application as one for relief and not opposing it in principle; again the issue being the amount to be paid by the claimant. In those circumstances the claimant’s hope that matters might be resolved was not a good reason for delay in this case.

On the total sums due, for service charges, judgment debts and the costs of proceedings, these came to £34,522.87. (Lambeth’s attempt to add in council tax arrears of £11K odd was rejected.)

So there was no evidence that Ms T could or would be able to pay the sums due for relief. Mr T’s bank statement, from a month ago, not exhibited to a statement or supported by a statement of truth, showed funds of £22,204.18. Even if it was accepted that those were still available, it was not enough.

The delay in bringing the application was dilatory, without excuse or explanation.

Lambeth accepted there would not be any great prejudice to them in granting relief (on full payment), give the use of the flat for temporary accommodation. But that in itself did not get Ms T anywhere.

Finally, Ms T argued that the windfall to Lambeth of gaining possession of the flat should be weighed in the balance. Ms T’s counsel:

also emphasised that the defendant will receive a windfall. But that of itself cannot tip the balance in a case where the claimant herself is to blame. She has failed to bring a claim promptly. She has failed to provide any adequate explanation as to why she did not bring the claim earlier. Even today she has not demonstrated that she has the financial means to pay any sum ordered by way of a condition of granting relief. So it is an inevitable consequence that if I refuse relief the defendant will receive a windfall. However that is at the doors of the claimant herself, because that is where the fault rests. That fact alone and in light of the other matters that I have considered does not tilt the balance and persuade me that I should exercise my equitable jurisdiction and grant relief from forfeiture.

Application refused. Relief not granted.

Comment

So. Lesson one is don’t go away, leaving the flat in the care of ‘Geoffrey’ who you don’t know. Lesson two is apply for relief asap and see it through. Lesson three is be able to pay sums due and costs on the day of the hearing. Lesson four, do not abandon an application because there are discussions. Lesson five – applying for set aside is high risk (even if you don’t discontinue it), so at least go for relief in the alternative.

I have said many times before, forfeiture is a draconian remedy, but the problem is that threatening forfeiture is about the only remedy the freeholder has on breach of lease. The only alternative for Lambeth here would have been seeking an order for sale on the charging order they had obtained, but, while that would at least have returned some equity to Ms T even though she would have lost the flat, it would have been a route that afforded her less protection and opportunities to remedy the position, so it is hard to fault Lambeth for the route they took.

It takes a lot for a residential lease to be forfeited. The leaseholder has to have not done a lot of things to remedy the situation over a sustained period of time. But it is hard to argue that it is just…

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Housing law - All, Leasehold and shared ownership, Possession and tagged , .

5 Comments

  1. Pingback: Tessa Shepperson Newsround #119

  2. Quick question – A leasehold flat not on mortgage is forfeited by landlord for the non-payment of service charges. Does the landlord have the responsibility to credit the service charge accounts with the outstanding service charges for the flat from the sale proceeds? Or will the landlord write of the service charge debts based on which the forfeiture was granted? The lease doesn’t specify anything around what is to be done with forfeiture sale proceeds.

    • Once it is forfeited, the lease is ended, so it couldn’t say what to do with subsequent proceeds of sale. It is, in any event, up to the freeholder what it does with the property. It may very likely sell, but it is not obliged to.

  3. Many thanks for the reply. So any guidance on what happens with the outstanding service charge debts.
    I am assuming the leaseholder lost the lease as they were not able to pay the service charge debt and the huge legal fees. Does the landlord here not have any legal responsibility for closing off the service charge debts?

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