Moves to make it harder to repossess leasehold homes over unpaid charges

Louis Chadwick and his wife were threatened with forfeiture while she was pregnant

Ministers are facing calls to prevent leaseholders being threatened with losing their home over unpaid charges.

Under current laws, branded "draconian" by campaigners, a property can be repossessed if the leaseholder owes as little as £350.

There is cross-party support for scrapping the practice of forfeiture in the Leasehold Reform Bill, which returns to the Lords on Wednesday.

The government says it recognises the issue needs to be tackled.

Last month, Housing Secretary Michael Gove said forfeiture was "wrong" and ministers would work with other parties in the Lords to find the best way of addressing this.

The Leasehold Bill, which is making its way through Parliament, would ban the creation of new leasehold houses in England and Wales, and make it easier for leaseholders to buy their freehold.

Under the current system, leaseholders often have to pay ground rent to a freeholder, as well as service charges to maintain the building.

A freeholder can apply to repossess a property if there is a breach of the lease, for example not paying the ground rent or service charge.

There are some protections for leaseholders. For example, if an alleged breach is not agreed by the leaseholder, the landlord has to apply to a tribunal or court to determine the breach before they can start forfeiture action.

However, campaigners say the threat of losing their home can be enough to persuade many leaseholders to pay up before the legal process is formally under way, even if they believe charges are unreasonable.

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Louis Chadwick and his wife Daniela Marinova were threatened with forfeiture when they refused to pay the full service charge for their flat, which Mr Chadwick said had escalated to an "extortionate" level.

The couple bought the flat in Croydon, south London, in his wife's name in 2017.

By 2022 their service charge had increased to more than £4,400 a year, up from around £3,200 the previous year.

The figure was also more than 60% higher than had been estimated at the start of the year.

Mr Chadwick said the building, which is a house converted into five flats, did not require extensive maintenance beyond things like basic gardening and painting.

The couple are in the process of challenging their service charge at a tribunal, but the case has not yet been heard.

They claim their managing agent has been slow to provide invoices for work and in some cases has failed to give evidence it has been carried out. They also argue expensive extra works have been added on top of their estimated charges for the year, which they believe are unnecessary.

Their managing agent, Eagerstates, disputes this, and said it readily provides invoices and supporting evidence.

The company said the service charge was based on actual expenses and extra regulations meant additional work was needed to ensure the property was compliant.

'It's been horrendous'

At the time they were threatened with forfeiture, Mr Chadwick's wife was pregnant.

Their son was born prematurely and diagnosed with spinal muscular atrophy, a serious genetic condition.

Mr Chadwick said the stress of the legal dispute over their flat "certainly didn't help the situation".

"It's just been horrendous," he said. "My wife was at breaking point."

The couple are currently abroad as their son is receiving treatment in Bulgaria, where he was born. However, if they decide to sell the flat, they are worried they may struggle because of the high service charges.

The Leasehold Knowledge Partnership charity advises leaseholders should always pay any charges first and dispute them after.

However, Mr Chadwick said he was concerned that if they paid the service charge in full, they would never get the money back.

"I'm not giving up now," he said. "I will keep fighting until all my appeals have run out."

Eagerstates said: "We would only engage any debt collectors or solicitors after all other avenues have been exhausted. We have given the leaseholder every chance to clear the bill before doing so."

The company said it did not take the decision "lightly", but it needed to recover the amounts "to ensure the running of the building".

'Obscene'

Harry Scoffin, who founded campaign group Free Leaseholders, said the idea someone could lose a flat worth £350,000 for a debt as small as £350 was "obscene".

He argued there was already a mechanism to claim back unpaid service charge through the county courts.

The Residential Freehold Association said it supported the reform of forfeiture to prevent landlords making "a windfall profit".

The association said its members "never want to use forfeiture to repossess a property, and hardly ever do".

However, a spokesman said the threat of forfeiture was necessary "to prevent serious lease breaches" and ensure funds were available to run buildings.

Katie Kendrick, co-founder of the National Leasehold Campaign, said the number of forfeiture cases which make it to court was relatively low, but it was used daily as a threat to get leaseholders to pay "unreasonable" charges.

She said it was disappointing MPs had voted down a Labour proposal in the Commons to abolish forfeiture in the Leasehold Bill, but she hoped the change would be introduced in the Lords.

Conservative peer and former minister Lord Young said he hoped the government would put forward its own amendment to scrap forfeiture, adding: "If they don't, I certainly will."

Labour said it would table another proposal in the Lords to abolish forfeiture and would be working with other parties to come to an agreement on the best way to address the issue.

Baroness Taylor, the party's shadow housing spokeswoman, said: "We will be saying to the government, if you don't want to completely scrap forfeiture, then you need to come forward with an alternative."