Written by Shabnam Ali-Khan – Partner, Russell-Cooke and a member of ALEP.
Protecting leaseholders without undermining building management
Forfeiture is a draconian remedy. A leaseholder can lose not only their home but also the equity they have accumulated, potentially over decades. Where the underlying dispute concerns a comparatively modest debt, that outcome is difficult to defend. There is a strong case for reform, but its success will depend on what replaces forfeiture and how effectively the alternative protects everyone living in a building.
The draft Commonhold and Leasehold Reform Bill, published in January 2026, proposes abolishing forfeiture for long residential leases and introducing a statutory lease enforcement scheme. These are proposed changes rather than the rules currently governing enforcement. The important debate is therefore how to move from an exceptionally severe remedy to a proportionate system that still works.
Understanding the existing safeguards is essential. Forfeiture is not something a landlord can pursue simply because a leaseholder questions a bill. Under section 168 of the Commonhold and Leasehold Reform Act 2002, a landlord generally cannot serve a forfeiture notice for a breach of covenant unless the breach has been admitted or finally determined through the appropriate legal process. In England, the First-tier Tribunal can determine whether a breach has occurred. Its determination does not itself terminate the lease.
For service charge arrears, section 81 of the Housing Act 1996 provides a further safeguard, requiring the amount to have been agreed or finally determined before forfeiture can proceed. Separately, the current financial threshold generally prevents forfeiture for unpaid ground rent, service charges or administration charges unless the total exceeds £350 or some of the debt has been outstanding for more than three years. Crossing that threshold does not remove the other legal protections.
Where required, a notice under section 146 of the Law of Property Act 1925 must identify the breach and require it to be remedied if it is capable of remedy. The leaseholder must have a reasonable opportunity to put matters right. Relief from forfeiture can also allow the lease to be preserved or restored, depending on the circumstances.
In practice, completed residential forfeitures are thought to be relatively rare. More commonly, the possibility of forfeiture prompts payment or resolution before matters reach that point. However, rarity does not make the consequences acceptable, nor does it remove the anxiety that a threat of losing a home can cause. The Government’s own assessment of the proposed reforms recognises both the limited number of completed forfeitures and the wider use of the threat.
The practical difficulty is that service charges fund shared obligations. Insurance, repairs, cleaning and the maintenance of lifts cannot simply stop while a dispute continues. If properly payable contributions remain unpaid, the resulting shortfall can delay work or place pressure on the building’s finances. The effects extend to neighbours who have paid their share, including those who collectively own the freehold and bear responsibility for managing their building.
There must be a clear distinction between challenging an unreasonable charge and failing to pay a charge that has been established as due. Leaseholders need accessible routes to dispute demands, transparent accounts and protection against excessive enforcement costs. Those managing buildings also need an effective way to recover legitimate arrears and address serious breaches affecting other residents.
The draft Bill seeks to reconcile these interests. Its proposed scheme would give courts a range of remedies, including orders requiring payment or remedial action and, where appropriate, an order for sale. Crucially, following a sale, the leaseholder would retain any remaining equity after the relevant debts, mortgage and costs were paid. That would remove the prospect of a landlord receiving the windfall associated with forfeiture. Losing a home would remain a serious consequence, but losing its entire remaining value would no longer follow automatically.
That is a substantial improvement in principle, but the test will be whether the new process is timely, understandable and affordable. An enforcement route that takes too long or costs more than the debt being recovered could leave buildings struggling to fund essential services. Equally, a process that allows costs to escalate unnecessarily would undermine the protection reform is intended to provide.
The Government’s impact assessment acknowledges uncertainty about the effect on court workloads and the possibility of more litigation as landlords adapt. Those risks deserve attention during scrutiny, alongside opportunities for earlier resolution through clear notices, payment arrangements and appropriate lender involvement.
Mortgage lenders also have an interest in a workable settlement. Protecting their security against forfeiture is valuable, but so is ensuring that the building supporting that security remains insured, maintained and financially stable.
Reform should protect leaseholders from disproportionate loss while preserving their neighbours’ ability to live in a properly managed building. Replacing forfeiture offers an opportunity to achieve both. The measure of success will be a fairer outcome for the individual and a reliable enforcement system for the building as a whole.
