Forfeiture clauses can seem daunting and understanding your next steps can be difficult.
In this article, leasehold property expert Kerry Martin breaks down what these clauses mean, why they matter, and the practical steps you can take if they appear in your lease…
What is the forfeiture clause in a lease UK?
A forfeiture clause is a provision in a lease that allows a freeholder or landlord to take possession of the flat in the event that the flat owner breaches the lease. Common breaches include failing to pay ground rent or service charges, or causing a nuisance to other residents.
Can a landlord forfeit a lease with no forfeiture clause?
In most circumstances, a forfeiture clause must be written into the lease for the freeholder or landlord to take possession.
However, in certain circumstances involving a fundamental breach of the lease, a freeholder or landlord may be able to seek possession without a such a clause.
What can tenants do about a forfeiture clause?
If a forfeiture clause exists in a lease, there is nothing a tenant or leaseholder can do to remove it.
It is standard for a forfeiture clause to exist and I would say that 99.9% of residential long leases contain one, it is perfectly normal.
What is a mortgagee protection clause?
Also known as a ‘mortgagee protection clause’ (MPC) or ‘lender protection clause’ (LPC).
A (MPC) or (LPC) are provisions in a lease, designed to protect a mortgage lender’s security.
This clause requires the freeholder or landlord to notify the lender of any breach and allow time for the lender to resolve it, such as paying arrears on behalf of the leaseholder.
In some cases n MPC or LPC can be in a different format where the issue is specifically related to a lease with a high or increasing ground rent. The provision will remove the freeholder’s or landlord’s ability to rely on rights granted to them in the Housing Act 1988. In that piece of legislation a freeholder/landlord can obtain possession of such a lease (in certain circumstances) far more easily – so again, it is a way for mortgage lenders to protect their security against the effect of the Housing Act 1988.
What does a mortgagee protection clause cover you for?
Although their primary focus is to protect mortgage lenders, they can also benefit leaseholders by making it easier to sell or remortgage a flat.
Due to this both mortgage lenders and buyers have started to request a LPC or MPC be included in the lease in recent years.
Do you always need a mortgagee protection clause?
It depends on the circumstances. If a flat owner is selling their flat or wants to remortgage and the lender involved requires a MPC, it’s difficult to move forward without obtaining one.
Some mortgage lenders will accept indemnity insurance, but this is really only a ‘sticking plaster’ and doesn’t deal with the core issue. Further, indemnity insurance is not always available.
How to get a mortgagee protection clause?
The first step would be to simply approach your freeholder or landlord to ask if they are willing to enter into a ‘Deed of Variation’ to insert a MPC into the lease.
If they are willing to do so, they will usually require the flat owner to cover their legal costs.
Read our previous article on Deed of Variations here.
How much does a deed of variation cost?
There isn’t generally a premium (or price) payable for a ‘MPC’ Deed of Variation but, as mentioned, leaseholders are often expected to pay the freeholder’s legal fees.
Our specialist Leasehold Property Team can provide an estimated budget for such a Deed of Variation. Get in touch with one of our experts on 01202 499255 or by filling in the form.
Can a freeholder refuse a Deed of variation?
Yes, they can. A lease cannot be varied ‘unilaterally’ i.e. by one party. Therefore, to agree and enter into a Deed of Variation, both the flat owner and the freeholder/landlord need to be in agreement.
Specialist Leasehold Property Experts
Our specialist Leasehold Property Teams are one of the largest and best resources on the South coast.
One of our experts can review your lease for you and assist you in getting a Deed of Variation to either vary your ground rent or get a Mortgagee Protection Clause included.
You can get in touch on 01202 499255 or by filling out the form at the top of this page. We offer a Free Initial chat for all new clients.
Comments