The Commonhold and Leasehold Reform Act 2002 restricts landlords’ rights to forfeit long leases of dwellings. Section 166 provides that demands for ground rent must first be made in a prescribed form stating the amount demanded and date on which it must be paid (which cannot be less than 30, or more than 60, days later), and, if different, the due date for payment under the lease.
Cheerupmate2 Ltd v De Luca Calce [2018] EWCA Civ 2230 concerned the attempted forfeiture of a lease following service of a section 166 notice in respect of arrears of ground rent totalling £11 payable for the period between 25 March 2010 and 25 March 2015. The notice incorporated an explanatory note that was once prescribed, but had since been altered because the note was thought to be unclear. The new wording explains more clearly that section 167 of the 2002 Act prevents landlords from forfeiting a lease unless rent arrears exceed £350 or include an amount that has been outstanding for more than three years. Did use of the out-of-date wording render the notice invalid? The First Tier and Upper Tribunals ruled that it did. But the Court of Appeal disagreed, citing Natt v Osman [2014] EWCA Civ 1520and Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89 in support of its decision to the contrary.
In particular, Elim Court confirmed that the intention of the legislature as to the consequences of non-compliance with statutory procedures, where not expressly stated in a statute, is to be ascertained in the light of the statutory scheme as a whole. Where missing information is of critical importance, non-compliance will generally result in the invalidity of the notice. But, if missing information is of secondary importance or merely ancillary, the notice may be valid. Two useful questions to ask are: whether the information required is particularised in the statute, or is required by the statute itself. If the information is required by the general provisions of a statute, or by subordinate legislation, it is likely to be viewed as being of secondary importance.
In this case, the problem did not relate to the information in the notice; it concerned its clarity. The form of notice was prescribed by a statutory instrument, and not by the statute itself, and the wording was changed by a “correction slip”, which suggested that the change did not alter the substance of the explanatory note. Furthermore, the explanatory notes were plainly subordinate to the notice itself. Therefore, the minor discrepancy between the notice served and the prescribed form did not invalidate the landlord’s notice.
However, the forfeiture clause in the lease operated where ground rent had been in arrears for at least two years. The landlord argued that the arrears were at least five years old. But the court agreed that section 166(4) changes the legal effect of lease provisions regarding non-payment or late payment of rent. The two-year period of grace in the forfeiture clause began running when the section 166 notice was served. So the landlord’s attempt to forfeit the lease was premature. Do section 166 notices also start time running on the three-year period prescribed by section 167? The court refused to opine since the answer was not relevant in this case.
Finally, and interestingly, the court queried whether it was sensible for the Land Registry to close leasehold titles following peaceable re-entry if tenants object and have applied for relief from forfeiture.
Allyson Colby, property law consultant