• Forefiture Clause In Lease

    By Guest on 30th Oct 2019

    As a block we are converting freehold flats to leasehold with owners holding shares in a company holding the freehold. The reason to improve salebility.
    Our solicitor has prepared a draft lease but it includes a landlord forefiture clause for non payment of rent (peppercorn 999yrs) and clauses to add arrears of service charges to rent thereby permitting forefiture for this as well. The CML handbook says there should not be a forefiture clause in the lease.
    "A lease must not contain a provision allowing the landlord to forfeit the lease (i.e. bring the term to an end and evict the lessee) because the lessee has become insolvent, since obviously this means the lender would not be able to repossess. This provision is rarely seen now since it effectively makes a property unmortgageable however a few still remain. In the event that a solicitor discovers one the provision must be removed by way of a Deed of Variation, that is to say a deed varying the terms of the lease" Is my interpretation correct?

  • 1 Answers

    By Guest on 30/10/2019

    The clause you cite is in relation to insolvency not arrears. The tenant would be insolvent if they are unable to pay their debts as they fall due, for example if they are unable to pay the mortgage. If they are in arrears of rent that is a different matter as they are not necessarily insolvent (although they may well be insolvent too but the lease cannot be forfeited solely due to their insolvency under the clause you cite). As long as there is provision for the lender to step in and pay the arrears (thus preventing forfeiture) with a sufficiently long notice period before proceedings commence (2 months is usually adequate) that would be fine.

    www.notaryexpress.co.uk

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