Despite measures such as the Leasehold Reform Act being taken to protect Leaseholders, there are still a lot of issues facing flat owners in the UK.
One of the most prominent concerns is forfeiture, especially when a forfeiture clause is involved.
In her latest article, Leasehold Property Associate Anne Albritton outlines how a Mortgagee Protection Clause can be used to reduce the threat of forfeiture.
What is a forfeiture clause in a lease?
In leasehold property, a forfeiture clause gives your landlord the right to terminate the lease. This means that they can take possession of your property.
Forfeiture usually happens if the service charge or ground rent has not been paid within the timeframe set out in the lease, often 21 days of being demanded by the landlord.
The Landlord can also forfeit the lease if any covenants (clauses which restrict you from taking certain actions) are breached.
What can tenants do about a forfeiture clause?
As we’ve discussed, a forfeiture clause can result in tenants treading on thin ice trying to avoid lease termination.
The last thing you want is to have the property repossessed after missing one payment or breaking a covenant that you didn’t know existed!
However, you can protect yourself by getting a Mortgagee Protection Clause included in the lease.
What is a Mortgagee Protection Clause?
A Mortgagee Protection Clause forces your landlord to give your lender 28 days’ notice before they take steps to repossess the property.
Your lender can then give you the heads up and either rectify the breach themselves or ask you to do so.
Do you need a Mortgagee Protection Clause?
A Mortgagee Protection Clause is often required by lenders.
Without the clause in place, your landlord can commence proceedings to forfeit the lease.
How to get a Mortgagee Protection Clause
You can get a Mortgagee Protection Clause included in the lease by using a Deed of Variation (DoV). This would vary the lease to incorporate a Mortgagee Protection Clause.
A Deed of Variation can also be used to reduce your ground rent, making things more affordable and reducing the chance of forfeiture.
In the full article, Anne outlines how much a deed of variation costs and whether your freeholder can refuse it. Click here to read it.