Introduction

For freehold management companies (ManCos) and resident directors, service charge arrears are one of the biggest headaches. Without service charges, the block can’t function – no cleaning, no insurance, no repairs. So, when leaseholders don’t pay, the ManCo has to act. But here’s the tricky part: what’s the right route to recover the money? Do you go for forfeiture, which is the nuclear option, or take the county court route to get a money judgment? In this blog, we’ll break down the options, explain the risks, and help directors understand what works best in practice.

What is forfeiture in leasehold law?

Forfeiture is the landlord’s ultimate weapon. It means ending the lease and taking back possession of the flat. In theory, it’s a powerful tool to deal with serious non-payment. But in practice, the courts are very cautious with forfeiture, and it comes with strict legal safeguards for leaseholders.

When can a ManCo use forfeiture for service charge arrears?

A lease usually allows forfeiture if arrears have built up, but only once the debt has been formally established. The process of forfeiture proceedings means getting a determination from the First-tier Tribunal or a court first. Even then, judges are reluctant to take someone’s home unless the arrears are significant and the process has been followed to the letter.

Ultimately, forfeiture means that the lease is ended and the freeholder gets the flat back, the leaseholder is dispossessed of it.

What is a county court money judgement?

A county court money judgment (CCJ) is a simpler way of recovering arrears. The ManCo sues the leaseholder for the debt, and if successful, the court orders the leaseholder to pay. This doesn’t end the lease but does create a legal debt that can be enforced through bailiffs or deductions from earnings.

If arrears are significant and a county court judgement remains unpaid, you can return to the court and seek a range of measured, one of which if the arrears are serious is an order for sale to realise the value of the flat to pay the arrears, and then distribute the proceeds of sale after. Sale proceeds will be distributed based on any charges registered against the title at HM Land Registry. The mortgage lender will have first charge and the county court judgment is treated as an unsecured debt, so one needs to understand the whole picture.

Choosing the Right Route: Forfeiture or a County Court Judgement

For most ManCos, a county court judgment (CCJ) is the practical choice. It’s less drastic, easier to obtain, and doesn’t carry the negative publicity or legal complexities that come with forfeiture. Forfeiture, which ends the lease and returns the flat to the freeholder, is generally reserved for extreme cases—such as very large arrears or repeated non-payment after other enforcement methods have failed.

However, directors need to be careful: pushing for forfeiture too quickly can waste time and money, or even result in the case being thrown out. Conversely, letting arrears accumulate without taking action puts the block’s finances at risk and can make recovery more difficult later. Directors must strike a balance between firmness and fairness, always following the lease and legal requirements precisely. Acting promptly and choosing the appropriate enforcement route ensures arrears are addressed effectively while avoiding unnecessary conflict or risk.

How can ManCo reduce the risk of arrears building up?

Good communication is the first step. Send clear demands, explain what the money is for, and keep residents updated on spending. Offering payment plans for those in genuine difficulty can also help. Above all, act quickly when arrears start – the longer it goes on, the harder it is to recover the money.

When leaseholders don’t pay their service charges, freehold ManCos face a tough choice: forfeiture or a county court judgment. Most of the time, a CCJ is the safer, more practical route, while forfeiture is kept as a last resort. Whatever the choice, the key is to act promptly, follow the lease carefully, and keep communication clear. That way, the block stays financially healthy without unnecessary drama.

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