Lease Forfeiture – Successful – Malik -v- McCadden (County Court at Willesden) 29th November 2019
This is one of those very sad cases which arises out of the position of leasehold law in this country. Many things have been said about it in the past and I am afraid that this is a classic example of how difficulties can arise, regardless of whose fault the situation is, but it puts those who are thrust into that particular environment into an almost impossible situation once a relationship has broken down. I set out below the law, how the particular case was decided and the result.
The legal position is very clear. This was a claim that arose out of and concerned 64 Boroughs Road, Kensal Rise in NW10 (‘the Property’). Mr. McCadden was a long leaseholder of Flat B, Dr Malik the freehold proprietor of the Property and also long lessee of the ground floor flat, Flat A. The long lease of Flat B was for a term of 189 years from June of 1984.
Dr. Malik had been in occupation of Flat A for some considerable period of time, she purchased the freehold from the Crown shortly after she purchased her leasehold interest. Mr. McCadden purchased the lease to Flat B in April 2016.
Not long after that, the relationship between Mr. McCadden and Dr. Malik deteriorated. It deteriorated to such an extent that Dr Mailk applied to the First Tier Tribunal (Property Chamber) for (1) a determination of breach of lease under s.168(4) Commonhold and Leasehold Reform Act 2002 and (2) a determination that the service charge was payable. Findings of both breach of lease and that service charge was payable was made by the Tribunal on 20th November 2017.
Subsequently a S.146 Notice was served, the lease forfeited and a claim issued for possession which was ordered on 6th August 2018.
Not always is it rare or unusual that residential lease forfeiture actually takes place. Indeed, Forfeiture orders are relatively common, but of course it is almost invariably the case that a court will grant relief from forfeiture once the breaches have been remedied. Likewise, though, it is necessary to remind oneself that the person in the position of the freeholder has to have some sensible means by which they can enforce their rights under the lease.
Although injunctions could be obtained, committals to prison could take place for breaching injunctions, one of the remedies which remain in the court’s armouries is forfeiture, tempered by the power to grant relief from forfeiture. This is the balance the current law provides to the Landlord & Tenant relationship but of course that balance can be tipped depending on the circumstances of a particular case and how it is managed.
The Court’s Power in Relation to Relief from Forfeiture
First of all, the Court’s power in relation to relief from forfeiture comes from s.146 of the Law of Property Act 1925. It sets out at (2) the court’s powers and it says this:
“Where a lessor is proceeding by action or otherwise to enforce such a right of re‑entry or forfeiture, the lessee may in the lessor’s action, if any or in any action brought by himself, apply to the court for relief. The court may grant or refuse relief as the court, having regard to the proceedings and conduct of the parties under the aforegoing of this section and to all the other circumstances think fit and in case of relief may grant it on such terms, if any, as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction, to restrain any like breach in the future as the court in the circumstances of each case thinks fit.”
It is therefore important to note that the question as to whether there was a breach of the lease was already determined in this case. The decision of the First Tier Tribunal of 20 November 2017 is a decision on that issue and the Tribunal summarises in the first paragraph of that decision the following breaches. It said this:
“1. The respondent has repeatedly failed to grant the landlord access to inspect the revised flat.
2. The respondent has carried out unauthorised structural alterations and removed landlord’s fixtures without consent, and respondent has caused a nuisance to the occupants of the ground floor flat.”
The Tribunal then goes on to make this warning:
“These are serious breaches, and the next step will be for the applicant to apply to the County Court to forfeit lease. The respondent is advised to seek legal advice at the earliest opportunity.”
The remedy, if Mr. McCadden disagreed with what the First Tier Tribunal found was to appeal to the Upper Tribunal. The First Tier Tribunal judgment had not been overturned on appeal and therefore, the Court had to accept that decision as being accurate and could not, even if it wanted to, or wished to, it cannot go behind the conclusions of the First Tier Tribunal.
It is extremely unusual, and only in extreme cases that forfeiture ever actually reaches the ultimate termination of ownership. It is not difficult to see why many people would regard losing a £600,000 asset, as has occurred here, because somebody has breached the various terms of the lease, as being draconian.
Therefore, in deciding the case, it was whether or not, as against the factual background, whether this is a case that a Court should give relief from forfeiture at all and if so, then on what terms that relief could be.
A Court could simply give open-ended relief, give relief on the basis that Mr. McCadden comply with the terms of his lease. A Court could give relief on the basis that he does that and also pay compensation, damages and any other expenses, or it can make what is now referred to as a “Freifeld order”; Freifeld v West Kensington Court Limited  EWCA Civ 806
A Freifeld order is where the Court makes the terms an order that relief from forfeiture be made conditional upon the lessee selling the property within a period of time. Those orders are useful in circumstances where the court concludes that there had been substantial breaches of the tenancy, that a court takes the view that the parties’ relationship is not going to be remedied, there is no way in which it is sensible to think or a Court could be satisfied that a person in Mr. McCadden’s position is going to remedy his breaches adequately and therefore, forfeiture should take place, but that he should not be denied all of the value of his asset, because that would be out of proportion to the failures that he has made.
A Court must therefore satisfy itself that there have been continuing breaches of the lease or there are other substantial grounds upon which it should not grant relief from forfeiture.
First of all, in the instant case, the Court must remind itself of the breaches that the Tribunal identified. The first is that there has been a repeated failure to grant the landlord access to inspect the demised flat. The Tribunal has made findings as to various occasions upon which agents acting on behalf of the freeholder made requests. In para.27 of the judgment there is reference to Corker Clifford making six requests over a period of time in July 2017 for access.
In the instant case the First Tier Tribunal made findings of fact and the Court cannot go behind those findings. The Court must therefore, in some ways, look at what has happened between the First Tier Tribunal’s determination and today and what it thinks the position will be going forward.
There was an inspection in December of 2018, access was granted by Mr. McCadden. There is some dispute about whether access was for forty minutes or two hours. Nothing turns on that, access was clearly given, but that was access which was given after protracted dispute between the parties. It can only seem that there is significant cause to fear that if this relationship were to continue, if relief from forfeiture were to be granted and if access to be requested, access would either be impeded in its entirety or it would be impeded to some considerable degree.
It was only after a protracted period of time, in the throes of this litigation after a relief from forfeiture application had been made that access was granted. At the time, Mr. McCadden had the benefit of solicitors acting on his behalf and they, no doubt, told him that if he wanted to have any prospect at all of obtaining relief from forfeiture, that he would have to grant access to Flat B.
The reality of the situation is, it was only in the extremist of a situation where proceedings were under way, where it was absolutely essential, and no real alternative available to Mr. McCadden at that stage that access was granted
The second issue found by the Tribunal was that there had been unauthorised structural alterations. Again, that is a finding of fact, and although it was based on inference and circumstances where Mr. McCadden says that he did not get proper notice of the hearing, without inspection of the inside of his flat, it is based upon at least this factual finding, which is that when the Tribunal inspected the lower flat they found hairline cracks which are clearly consistent with fairly heavy work having been done above.
Ultimately, again, the Court could not go behind the factual findings of the Tribunal. They could have been challenged, but they have not been.
One of the issues which arises in this case is about a kitchen and about whether a kitchen was in the position that was shown on the original lease plan or whether it was not. The position appears to be this; that a previous long lessee of Flat B had placed a kitchen, either when the flats were originally converted or thereafter, but before Mr. McCadden purchased it, in a position that is shown otherwise than where it is shown on the lease plans. It may be open to argument as to the extent of the breach of a lease as to moving a kitchen back to where it is shown on a lease plan.
What concerned the Court, in the instant case, was that the structural alteration and moving of the kitchen. The whole tenure of the lease is that any substantial alterations to the interior of the flat should be done with the consent of the freeholder. No doubt, it says that consent should not be unreasonably withheld or words to that effect, or those words would be implied.
To undertake to move a kitchen is normally regarded as a structural alteration. It is very difficult to move a kitchen without making structural alterations, the reality of it is that it was done after the First Tier Tribunal’s decision was made, in circumstances where consent was certainly not obtained in writing, and the Court was satisfied, having heard the evidence, without at least proper consent even orally from the freeholder. That, again, was a worrying indicator as to the trends in the relationship between the parties.
The most serious breaches that were found by the First Tier Tribunal is the nuisance to the occupants. In the words of the paragraphs of the Tribunal’s decision which refer to this, they set out the terms of cl.2 of the lease and also the first schedule, para.1 and that says,
“Not to use the flat nor permit for same to be used for any purpose whatsoever other than as a private dwelling house in the occupation of one family one, nor for any purpose from which a nuisance can arise to the owners, lessees or occupiers of other flats in the building or in the neighbourhood.”
The Tribunal then goes on to find the following:
“1. The respondent has caused damage to the ground floor flat, he has damaged the ceiling in the main bedroom, he has caused cracks to the bedroom ceiling, he has caused dust to penetrate the ceiling above the kitchen and has settled on a false ceiling below. This has caused damage to the spotlights in the kitchen.
2. The respondent has left large quantities of building waste and rubber in the front garden. It has been left there for some months. The rubble has included a toilet.
3. The works have been executed without any regard to the impact on the ground floor flat. The respondent has failed to liaise with the applicant, the works have been noisy, they have been executed at unreasonably times namely at night, early in the morning and at weekends. On occasions, works have been executed at 4.00 a.m., the works have been executed over a period of eighteen months and have still not been completed. This is an unreasonable length of time, there has been excessive dust, several builders have banged on the applicant’s door demanding payment, because the respondents doorbell does not work.”
Again, rather worryingly in the circumstances of this case, despite the First Tier Tribunal’s decision, very little appeared to have been done to remedy the damage that has been caused to Dr. Malik’s flat. Again, what one would expect to see in a case such as this is there being a clear and open offer from somebody in Mr. McCadden’s position, for a joint structural surveyor to be instructed to inspect, with his agreement that he would pay for any damage which has been caused to be rectified. He would, no doubt, be making offers to say that he will ensure that any future work he does is done in a reasonable fashion.
- None of those sorts of assurances were properly dealt with in this case and, indeed, contrary in many ways the reality is that the situation where the flat continues to be in a difficult or a state of disrepair has continued, and that is clearly causing a nuisance to Dr. Malik. In those circumstances, the failures have not been remedied.
- In the circumstances therefore, the Court in Malik v McCadden (District Judge Andrew Holmes at the Willesden County Court) was quite satisfied that in all the circumstances of this case it was appropriate to make the following order –:
“… to deny the request for relief from forfeiture, save to the extent indicated, which is that the order will be that Mr. McCadden will have six months in which he can sell Flat B, if he does sell Flat B within six months, then he will be granted relief from forfeiture to that extent. If he does not, then the forfeiture will take effect.”
“Six months seems as against the background of this case where it has been ongoing since certainly the mid-part of 2017, if not earlier, a fair balance between the parties. Dr. Malik would, no doubt, like this all to come to an end, but it seems to me that six months is a fair period for Mr. McCadden to be able to market the property, to ensure that as many people as possible can view it, that as much can be done to maximise the amount of money he can obtain for his interest in the property so that he can mitigate his loss.”
The Court accepted that McCaden is probably not going to get back the money that he paid for it and that is unfortunate, because nobody wants somebody in Mr. McCadden’s position to suffer any greater financial loss than they need to. But what the court is prepared to do is to allow him, hopefully, to obtain the vast majority of what he paid, so that he has a sizeable amount of money that he can take out of this property, can rehouse himself and can move on as he probably needs to, as much as anybody else does, to move on with his life as soon as possible, certainly within the next six months, to ensure that what is noted from his GP’s letter as to the effect this has all had on his health is brought to an end as quickly as it can be.”
Sadly, Mr McCadden did not sell the property within 6 months and on Ms Malik’s final application to Court, Mr McCadden’s claim for relief was dismissed and permission granted for Ms Malik to enforce the original 2018 order for possession.
Flat B was re-entered by County Court Bailiff’s on 27th February 2020 resulting in a windfall to Ms Malik.
Oliver Fisher was instructed by the Freeholder, Dr Afshan Malik.
By Arman Khosravi 7th July 2020