Section 167 (Restrictions on Forfeiture of a Leasehold Property for small sums of money)
1. This section states that a Landlord may not seek forfeiture of a Leasehold property for non –payment of Ground Rent, Service Charges or Administration Charges unless either:
i. The amount outstanding is more than the ‘prescribed sum’. The rrescribed sum means an amount stated by the Government in the relevant regulations. Section 167 states default charges for late payment which are due under the Lease as an Administration charge count towards the total amount.
ii. The amount has been outstanding for longer than a ‘prescribed period’. The prescribed period means a period of time stated by the Government in the relevant regulations. An amount is taken to be outstanding from the day upon which the Lease states that it becomes payable.
2. Forfeiture of a Leasehold property, if granted by a court, means that a Landlord can take back a Leasehold property and the Leaseholder loses all rights to use that property or sell it, even if they still have a mortgage owing on the property.
What is the ‘prescribed sum’ and ‘prescribed period’?
1. At the time of writing this article (September 2014) the relevant regulations were The Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004.
2. The 2004 Regulations state that:
i. The prescribed sum is £350
ii. The prescribed period is three years
3. This means that under the rules given in Section 167 of Commonhold and Leasehold Reform Act 2002 a Landlord may not be entitled apply for forfeiture in respect of an amount outstanding for Ground Rent, Service Charges or Administration Charges unless that amount is greater than £350.
4. If the amount is £350 or less a Landlord can only apply for forfeiture if that sum has been outstanding for more than 3 years.
Click on the link to read more about the Commonhold and Leasehold Reform Act 2002