Ground Rent Demands

Monday, December 17, 2018

TIMING AND FORFEITURE

Ground rent is payable by Tenants under most Leases. The Lease will usually set out how much is payable, when it is payable and the manner in which it is payable. However, the terms of the Lease are only a part of the picture because Landlords also have to comply with the law.

Before rent is payable Landlords have to give a notice to their Tenants and that notice must contain specified information. The notice must set out:

  1. the amount of rent payable;
  2. when it is payable;
  3. the date it was payable under the Lease (if different to the date in b)).

To ensure compliance with the legislation it is important that the date the rent is payable (i.e. point b] complies with the legislation. The date can never be:

  • earlier than the date the rent is payable under the Lease;
  • less than 30 days after the notice is given;
  • more than 60 days after the notice is given.

Difficulties can arise where, as is often the case in service charge matters, legislation adds a gloss onto contractual provisions but does not do away with the terms of the contractual provisions entirely.

In the case of Cheerupmate2 Limited v Calce the Court of Appeal had to decide when rent was due in the context of forfeiture proceedings. In that case Clause 3 of the Lease contained a forfeiture clause which entitled the Landlord to re-enter if the rent was "in arrear for the space of two years after the same shall have become due (whether any formal or legal demand thereof shall have been made or not)."

On the 12th March 2015 the Landlord gave the Tenant a notice which specified that rent was payable in respect of the period the 25th March 2010 to the 25th March 2015.

The issue was whether the rent became due (i) on the date it had become due under the Lease or (ii) on the date it became due as specified on the demand (25th April 2015). The difference was crucial because if it was the former the rent (or some of it) would have been outstanding for more than 3 years (entitling the Landlord to forfeit pursuant to the Landlord and Tenant (Notice of Rent) (England) Regulations 2004) whereas if the rent did not become until after the demand rent would not have been outstanding for at least 3 years and the Landlord was not entitled to forfeit.

The Court of Appeal determined that, notwithstanding the date rent is stated to be due under a Lease, the rent does not become due for the purposes of the 2004 Regulations until the date specified for payment under a rent demand.

The moral for Landlords is that before forfeiting a Lease they should wait until either (i) the rent unpaid (properly demanded) exceeds £350 or (ii) at least 3 years have elapsed since the date for payment set out in a valid rent demand.

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