Landlords & Tenants, Know your Rights

Ground rent is a term used to represent an amount payable by a tenant for rent of the land upon which the building containing the leased property is situated.

The Ground Rent Notice

Section 166(1) of the Commonhold and Leasehold Reform Act 2002 (“s.166 of the CLRA 2002”) provides that a tenant is not liable to make any payment of ground rent until a notice is served on the tenant by its landlord.

The notice required by s.166 must be in the prescribed form and contain certain information, which is set out in s.166 and the Landlord and Tenant (Notice of Rent) (England) Regulations 2004.  The obligatory information includes:

  1. For the ground rent:
    1. the amount of rent due;
    1. the date on which it is due;
    1. the date on which the rent would have been due under the lease (if different from the due date specified in the notice); and
    1. the period in respect of which it is payable.
  • The name of the tenant and the name and address of the landlord and the person to whom payment should be made.
  • Prescribed notes for tenants and landlords containing information about their rights and obligations with respect to the notice.
  • The date specified in the notice for the payment of the rent must not be:
  • Less than 30 days or more than 60 days after the date of the notice.
  • Before the date on which the tenant would have been liable to pay the rent under the lease.

S.166 provides that the notice may be sent by post, in which case it must be addressed to the tenant at the property, unless the tenant has given the landlord written notice of a different address in England and Wales for receipt of notices under s.166 of the CLRA 2002.

Consequences of Issuing Defective Notices

Compliance with s.166 is a condition to a tenant’s liability to pay ground rent.  If the notice is not in the prescribed form or completed in accordance with s.166, the tenant is not liable for payment until or unless the defect is corrected. 

The case of Cheerupmate2 Limited v Mr Franco De Luca Calce [2017] UKUT 0377 (TCC), has, however, highlighted that ‘minor’ defects in the notice do not render it defective or eradicate liability to pay.  Lord Justice Leweson commented that it was unlikely that Parliament intended for minor discrepancies in a notice to validate the notice or rid a tenant of its liability to pay.

Amending Defective Notices

In reality, the failure by the landlord to serve a proper notice only delays payment of the ground rent until such time it is amended and served correctly. 

Ground rent is not subject to the “18-month rule” and generally, may be recovered up to 6 years from the date that it falls due, as many leases state that the tenant is to pay ground rent whether “demanded or not”.  As long as the ground rent notice is in the prescribed form and is prepared in accordance with s.166, the tenant will be liable.

Consequences of Withholding Payment for Ground Rent

There are a number of possible remedies available to a landlord where a tenant withholds payment of ground rent, however the most common remedy sought is forfeiture of the lease.   Forfeiture of the lease enables a landlord to re-enter the property following a breach by the tenant and terminate the lease without obtaining a determination or serving a s.146 Law of Property Act 1925 Notice.

A landlord must ensure that the lease expressly reserves the right to forfeit the lease prior to considering forfeiture. 

The landlord must also ensure compliance with s.167 of the Commonhold and Leasehold Reform Act, which states:

167 (1) A landlord under a long lease of a dwelling may not exercise the right of re-entry or forfeiture for failure by a tenant to pay an amount consisting of rent, service charges or administration charges (or a combination of them) unless the unpaid amount –

                             (a)  exceeds the prescribed sum, or

                             (b) consists of or includes an amount which has been payable for more than a

                                   prescribed period. 

The Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004 prescribe £350.00 as the amount and three years as the period.

If a landlord has issued defective ground rent notices for the past five years, for instance, and has decided to amend and re-serve these on the tenant, the landlord’s right to forfeit the lease will only arise after the prescribed period has elapsed (for arrears that are less than £350.00).  The prescribed period does not commence from the date the sums were due, but when they were demanded.

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