Leasehold, forfeiture and rent-strikes
This is a quick note to myself about a problem in landlord-tenant activism.
It's a long-established tactic to withhold rent. I once led a successful rent-strike myself. But the use of rent-strikes in the leasehold sector is quite dangerous.
This is for two reasons:
- leasehold in the UK often involves paying a significant premium as well as ongoing rent
- residential leasehold contracts generally have a forfeiture clause for breach of covenant.
Now forfeiture is not like a mortgage lender taking possession of your home, selling it, deducting what you owe and paying you the balance. Or at least, it is similar, except for that bit about you getting paid the balance at the end.
So if you owe £400 to the landlord, you place your £400000 home at risk by withholding the rent, which is a breach of covenant. When your home is forcibly sold, you don't get the £399600 balance back; you lose it. And if you had a mortgage, you still owe that.
This all rather different from the non-leasehold situation where you pay a refundable deposit of £3000 and dispute a £400 bill, because the stakes are a thousand times higher. And you'd get £2600 of the deposit back after eviction.
So I think the rent-strike tactic is being over-generalised and people need to be very careful.
Note the commercial background to forfeiture: though ground rent is deferred compensation and therefore functions nostly like a loan, the result of a default by the payer/borrower is not that the receipient/lender loses, but instead gains a windfall. Quite unusual, and capable of driving highly predatory behaviour.
(Incidentally, my former employer, albeit a year after I'd left the company, went on rent strike for *liquidity* reasons: they wanted their deposit back so stopped paying the rent. The landlord started deducting the unpaid rent from the deposit, which improved cashflow until it because obvious the company wasn't going to pay up and would run the £1000000 deposit down to £0 unless the landlord renegotiated the lease. Ballsy.)