Collective enfranchisement or lease extension—recoverable costs

The following Property practice note provides comprehensive and up to date legal information covering:

  • Collective enfranchisement or lease extension—recoverable costs
  • Limits on recovery
  • Other costs

Collective enfranchisement or lease extension—recoverable costs

The Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993) sets down the elements of the freeholder’s costs that can be recovered from the tenant in a claim for:

  1. a lease extension, or

  2. collective enfranchisement

Broadly, the tenant must pay the reasonable costs incurred in:

  1. any investigation (reasonably undertaken) of the right to a new lease (and, in the case of collective enfranchisement, providing abstracts and copies to the nominee purchaser)

  2. obtaining a valuation, and

  3. the grant of a new lease or the sale of the freehold

In the case of a lease extension, this includes the costs of the competent landlord, as well as any intermediate landlord and any third party to the tenant’s lease. In the case of collective enfranchisement, this includes the ‘reversioner’ and any other ‘relevant landlord’.

Costs are only regarded as reasonable if and to the extent the freeholder or intermediate landlord would reasonably be expected to have incurred them if it was personally liable.

In Trustees of John Lyon's Charity (a collective enfranchisement case), the Upper Tribunal (Lands Chamber) (UT), confirmed that the following applied in relation to LRHUDA 1993, s 33:

  1. the burden is on the reversioner to prove that the costs are reasonable

  2. despite the analogy between compulsory purchase and leasehold enfranchisement, LRHUDA 1993, s 33 does not adopt the indemnity principle which

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