Whether service charge proceedings must be concluded before a lease can be forfeited
In Hyslop v 38/41 CHG Residents Co Ltd , the applicant held a lease of a flat in a block, the freehold of which was held by the respondent. Several years previously, the leaseholder had been held by the First-tier Tribunal to owe a sum of service charges to the freeholder.
Subsequently, the respondent brought forfeiture proceedings in the County Court. The applicant obtained permission to appeal (to the Upper Tribunal) in respect of the service charge determination. Her appeal was outstanding at the time the forfeiture proceedings were heard in the County Court. The County Court made a possession order but the leaseholder was given time to pay the service charge arrears. She appealed to the High Court, arguing that the service charge proceedings should have been concluded before the forfeiture proceedings were heard.
The High Court allowed the leaseholder’s appeal. It found that, until the Upper Tribunal had determined the service charge appeal, the service charges could not be held to be payable and therefore the County Court forfeiture proceedings should have been stayed.
Under s.81 of the Housing Act 1996, there must be a final determination of the leaseholder’s liability to pay service charges before forfeiture proceedings could be concluded.
Advice and action for landlords
This case highlights the importance of ensuring that all avenues are closed before forfeiture proceedings are issued. As the leaseholder’s liability to pay service charges had not been determined at the time the forfeiture proceedings were heard, there were insufficient grounds to make a possession order in favour of the landlord.
The High Court allowed the leaseholder’s appeal finding that, until the Upper Tribunal had determined the service charge appeal, the service charges could not be held to be payable.