PART 4 of the Commonhold and Leasehold Reform Bill: Understanding the Abolition of Forfeiture

The draft Commonhold and Leasehold Reform Bill has already attracted considerable attention as another significant development in property law in recent years.

The Bill proposes to reinvigorate commonhold, ban the sale of new long leases of flats, cap ground rents at £250, abolish forfeiture, and simplify the enforcement of Estate Rentcharges.

Among its wide-ranging reforms, the proposed abolition of forfeiture, and its replacement with a new framework for lease enforcement claims, is set to reshape the landscape of residential leasehold management and enforcement, as it is historically a powerful (and often controversial) remedy available to landlords.

This article explores the key provisions, conditions, and potential implications of these changes, which can be found at Part 4 of the Bill.

Abolition of Forfeiture

Section 138(1) provides that “A long residential lease may not be terminated on the grounds of a breach of a covenant of the lease” and that any lease provision enabling such termination becomes unenforceable.

This removes the traditional remedy of forfeiture from the landlord’s enforcement toolkit.

What is a Long Residential Lease?

A long residential lease is a “long lease” of “residential property”. The concept of a “long lease” is familiar to enfranchisement practitioners. It is, essentially, a lease granted for a term exceeding 21 years, and a variety of other more obscure types of lease. Notably, shared ownership leases fall within this definition.

“Residential property” is defined as “a building or part of a building occupied or intended to be occupied as a separate dwelling together with any yard, garden, outhouses and appurtenances belonging to or usually enjoyed with it”.

That, presumably, excludes leases of rooms with shared kitchen / diners and other essential living spaces (per JLK Limited v Emmanuel Chiedu Ezekwe (& Others) [2017] UKUT 277 (LC) and Q Studios (Stoke) RTM Co Ltd v Premier Ground Rents No. 6 Ltd [2020] UKUT 197 (LC)). It may be that there will be arguments about the meaning of “dwelling” and whether it includes properties that are used for Airbnb and other short-term lettings.

Introduction of Lease Enforcement Claims

In place of forfeiture, the Bill enables landlords (but perhaps not RTM or RMC companies, who are not “landlords”) to bring lease enforcement claims.

These claims are subject to seven statutory conditions, including:

1. The lease must be either post‑commencement or a pre-commencement lease containing a forfeiture clause.
2. A prescribed explanatory statement must have been served on the leaseholder by the Landlord (the contents of which will be the subject of secondary legislation).
3. The covenant that has been breached must be enforceable by the landlord (presumably excluding breaches that have been waived).
4. The breach must not be an “excepted breach”, e.g. non-payment of ground rent, or a breach occurring on the ground of a person becoming insolvent or on the ground of an individual’s death or incapacity.
5. Financial breaches must either exceed a statutory minimum (which will be set in secondary legislation as a sum between £500 and £5,000) or fall within certain criteria.
6. A breach must have been admitted by the leaseholder, in writing, or finally determined. This is similar to the current limitation on the service of s.146 notices under s.81 of the Housing Act 1996 and s.168 of the Commonhold and Leasehold Reform Act 2002. The definition of “finally determined” appears to be similar to those provisions, but there are some differences that will need to be unpicked. There has to be an application to a court or tribunal that a breach has occurred. It is not clear whether this would include a standard debt claim. The tenant and other interested parties must be put on notice. It isn’t yet clear to me (it may be on re-reading) whether a “final determination” would include a default judgment (as has been so held under s.81 and s.168).
7. A formal lease enforcement notice must be issued. Confusingly, or perhaps deliberately – under s.146 of the Bill (not to be confused with s.146 of the Law and Property 1925).

Court Powers and Considerations

Once a valid claim is established meeting the 7 conditions above, the Court has broad discretion to:

• Make any appropriate and proportionate Order (whether or not the Landlord has applied for that Order), or
• Dismiss the claim entirely.

The precise facts of the case are likely to be important. The Court must consider the factors set out in s.148(6) of the Bill when deciding what order to grant, including:

• Conduct of the parties
• Seriousness and remedy of the breach
• Likelihood of compliance
• Impacts on other interested parties

Available Remedies

The Bill introduces specific enforcement tools:

Remedial Orders

These compel a tenant to complete a specified step by a specified time (presumably to remedy any breach which is capable of being remedied).

If a remedial order is not complied with a further lease enforcement action can be taken, with a presumption that all the conditions for making a claim have been satisfied, and the failure to comply with an order amounts to a breach of covenant.

Orders for Sale

A significant remedy to be conducted by a receiver, with the proceeds of sale being applied first to the costs of the person conducting the sale, then to any sums owed to the landlord, then to any person holding a charge over the property, and then to the leaseholder / tenant, in that order.

If the lease contains a covenant against assigning the lease without the consent of the landlord, the landlord must consent to an assignment (such consent not to be unreasonably withheld or delayed), before an order can be made. An order for sale can include an order terminating a sub-lease.

Cost Recovery

Sections 152 and 153 of the Bill introduce a structured cost‑recovery framework whereby the Court has the power to award any costs incurred in connection with obtaining a final determination that a breach has occurred, the cost of preparing and serving a lease enforcement notice and the cost of making a lease enforcement claim, subject to certain conditions.

Key features include:

• Courts may award “just and equitable” costs, not necessarily full landlord recovery.
• Pre‑commencement lease clauses requiring tenants to pay forfeiture‑related costs are reinterpreted to apply to lease enforcement claims (s.153)
• An implied term in post‑commencement leases requires tenants to cover reasonable enforcement‑related costs.

These provisions provide reassurance to landlords concerned about the financial implications of forfeiture abolition.

Looking further at s.153, it provides that any provision in a pre-commencement lease which would require a leaseholder / tenant to pay costs relating to the termination of a lease on the grounds of a breach of covenant must be read as a covenant to pay reasonable costs incurred by the landlord in connection with a lease enforcement claim. That is intended to cover the type of clause that has been the subject of a significant amount of litigation, beginning with Freeholders of 69 Marina v Oram [2011] EWCA Civ 1258 (costs incurred for the purpose of proceedings under s.146 or s.147 of the LPA 1925 and in contemplation of forfeiture). It is unclear whether it would cause narrower clauses such as those considered in Tower Hamlets v Khan [2022] EWCA Civ 831 (costs “incidental to” the preparation of s.146 notices) to be read in a broader way to include all costs relating to lease enforcement claims.

The cost provisions will be a relief to landlords, who were concerned about the abolition of forfeiture having the unintended consequence of leaving them without any cost recovery remedies.

What is the Lease Enforcement Process?

In practice, a typical enforcement sequence will involve:

1. Pre‑action correspondence and a letter before claim
2. Application for a final determination of breach
3. Service of a lease enforcement notice
4. Commencement of the lease enforcement claim

The Court already has the power to make orders for sale and grant injunctions or orders for specific performance. It is presently unclear to me (it may become clear on re-reading) how orders for sale and remedial orders under Part 4 of the Bill will differ from those powers.

As ever, time will tell.

Conclusion

The abolition of forfeiture marks a fundamental shift in residential lease enforcement. While the new system of lease enforcement claims retains powerful remedies—such as remedial orders and orders for sale—it introduces a more structured, proportionate, and Court‑supervised approach.

As with any major legislative reform, some uncertainty remains, and the practical application of the new provisions will develop over time.

For now, landlords and practitioners should familiarise themselves with the forthcoming framework to prepare for its significant procedural and strategic implications.

Please get in touch with our leasehold solicitors if you would like us to provide advice.  Email us at info@brethertons.co.uk or call 01295 270999 (Banbury Office), 01869 252161 (Bicester Office), 01788 579579 (Rugby Office) or 01242 472747 (Cheltenham).