Paolo Clemente v Mindmere Limited

A landlord does not waive the right to forfeit a lease for unpaid service charges merely by issuing County Court proceedings for a money judgment for those charges. The proceedings may obtain the determination required before a notice under section 146 of the Law of Property Act 1925 can be served. Waiver depends on an unequivocal election to treat the tenancy as continuing. A demand for rent or charges falling due after the breach may amount to waiver, but proceedings directed to establishing and recovering the existing arrears do not necessarily do so.

The appellant was the tenant of a long lease containing a covenant to pay the landlord’s costs incurred in preparing and serving a notice under section 146 of the Law of Property Act 1925. The landlord’s solicitors warned of arrears and then issued County Court proceedings for unpaid service charges, reserve fund contributions and ground rent. The proceedings were transferred to the First-tier Tribunal, which determined the charges to be reasonable and payable and held that the landlord’s legal costs could be demanded as an administration charge.

The appellant appealed against that costs determination. The issue was whether issuing proceedings for a money judgment had waived the landlord’s right to forfeit for non-payment of the charges, preventing reliance on the lease covenant.

1. Appeal dismissed. The determination that the landlord’s legal costs could be demanded as an administration charge was upheld.
2. Waiver of forfeiture requires the landlord to choose an act incompatible with forfeiture. A demand for rent falling due after the breach recognises the continued existence of the tenancy and may waive the right to forfeit for the earlier breach.
3. Section 81 of the Housing Act 1996 prevents forfeiture for unpaid service or administration charges unless their payability has been finally determined by the appropriate tribunal or a court, or admitted by the tenant. The statutory scheme therefore permits a landlord to obtain the necessary determination from the County Court as well as from the First-tier Tribunal.
4. The reasoning in Cussens v Realreed Limited [2013] EWHC 1229 supported the conclusion that proceedings seeking a determination of breach, including an action for damages, can be compatible with a subsequent right to forfeit. The proceedings here were directed to establishing and recovering existing arrears, not to recognising that the lease would continue.
5. Cornillie v Saha (1996) 28 HLR 561 was distinguishable. Proceedings enforcing access to a flat demonstrated recognition that the lease continued, whereas the present proceedings did not involve such recognition. The absence of any demand or claim for charges falling due after the relevant breach was material.
6. The absence of any waiver argument in London Borough of Tower Hamlets v Khan [2022] EWCA Civ 831, where the landlord had similarly issued County Court proceedings for service-charge arrears, was a further relevant indication, although that issue had not been decided in that case.
7. Accordingly, pursuing a money judgment for service charges was not a waiver of the right to forfeit for failure to pay those charges.

• Upper Tribunal (Lands Chamber): appeal against the First-tier Tribunal’s costs determination dismissed.
• First-tier Tribunal (Property Chamber): on 3 April 2023, determined that the service charges were reasonable and payable and that £15,563 in legal costs would be reasonable and payable as an administration charge if demanded under the lease covenant.
• County Court: proceedings for unpaid service charges and ground rent were transferred to the First-tier Tribunal by order dated 8 April 2022.