A Section 146 notice is the first formal step a landlord can take to forfeit a lease for breach. If you are a leaseholder served with a Section 146 notice, you have important rights and a limited time to act. If you are a freeholder considering forfeiture, the procedure must be followed precisely or the right to forfeit can be lost.
This guide explains what a Section 146 notice is, what it must contain, how leaseholders can respond and how relief from forfeiture works.
Section 146 of the Law of Property Act 1925 sets out the requirements before a landlord can forfeit a lease for breach of covenant (except for breach of the covenant to pay rent, which has its own procedure).
The notice must:
The notice must give the tenant a reasonable time to comply before the landlord can take further steps.
Section 146 notices are typically used for:
For breaches of the covenant to pay rent, the landlord does not need to serve a Section 146 notice. The procedure is different and involves the rent itself becoming forfeit.
To be valid, a Section 146 notice must:
The notice must specify what the breach is. Vague references are not enough. The notice should identify:
If the breach can be remedied, the notice must require the tenant to remedy it. If the breach cannot be remedied (for example, a one-off act of nuisance), the notice need only specify the breach.
The tenant must be given a reasonable time to remedy. What is reasonable depends on the breach. A few weeks for minor repairs may be enough; major works may need months.
If the landlord wants compensation, the notice should say so.
If the notice is invalid, the landlord cannot proceed to forfeit. The notice must be re-served correctly. Common defects that invalidate notices include:
Understand exactly what is alleged. Look at the lease to see whether the alleged breach falls within the relevant covenant.
Forfeiture has serious consequences. Specialist advice early is essential.
If the landlord's allegations are not accurate, respond setting out the position. Provide evidence where available.
If there has been a breach but it can be put right, doing so quickly avoids forfeiture. Document the steps taken.
In some cases, applying to the court for a declaration on the validity of the notice can be useful.
If service charges or other sums are claimed, paying without prejudice while disputing the underlying issue can protect against forfeiture.
Forfeiture (also known as re-entry) can happen in one of two ways:
The landlord issues a claim for possession in the County Court. This is the more common route for residential property.
The landlord physically re-enters the property. This is generally not available for residential property occupied as a dwelling because of the Protection from Eviction Act 1977. For commercial property, peaceful re-entry can be used.
Even after forfeiture, the leaseholder can usually apply to the court for relief from forfeiture. The court has wide discretion to grant relief on terms that may include:
Relief is granted in most residential cases where the breach is remediable and the leaseholder is willing and able to put matters right.
The court can grant relief at any stage of the proceedings or after the forfeiture order, subject to specific time limits in different scenarios. The classic position is that relief can be granted up to six months after the landlord has recovered possession.
The time limits are different and depend on the type of breach. Relief should be applied for as soon as possible.
The standard route. The leaseholder asks the court to restore the lease on terms.
Where the Section 146 notice was defective or the procedure was not followed.
Many forfeiture cases settle without final orders. The leaseholder remedies the breach and pays compensation, and the lease is restored.
Where the breach is non-payment of service charges, additional protections apply. The landlord cannot forfeit unless:
These protections are set out in section 81 of the Housing Act 1996 and section 167 of the Commonhold and Leasehold Reform Act 2002.
Section 146 notices set a time clock running. Ignoring them is the worst response.
The procedure is technical. Self-help often leads to making the position worse.
Where there has been a genuine breach, refusing to remedy it for principle rather than substance usually leads to forfeiture proceedings.
Continuing payment under protest protects the leaseholder's position much better than non-payment.
Drafting the notice without legal advice often produces defective notices.
Setting an unreasonable deadline can invalidate the notice.
Where a breach is remediable, the notice must require remedy.
This is a criminal offence as well as being ineffective.
Where there is a mortgage on the lease, the mortgagee may also apply for relief from forfeiture. Lenders are usually keen to protect their security. Many forfeiture proceedings involve the mortgagee paying off the breach and recovering the cost from the leaseholder.
Section 146 notices and forfeiture proceedings are technical and the consequences can be severe (loss of the lease and the equity tied up in it). Both leaseholders served with notices and landlords considering forfeiture should take specialist advice.
A direct access barrister with property and leasehold experience can advise on the validity of the notice, the merits of any defence or relief application, and represent you at any hearing.
If you have a hearing coming up or want a clear view of your options, a direct access barrister can usually advise quickly and on a fixed fee. Contact our team with a brief outline of your case and we will arrange a quote.