Leasehold
Apr 26, 2024

Going to Tribunal for Lease Extension & Collective Enfranchisement

When leaseholders exercise their statutory right to extend their lease or purchase their freehold, it often initiates...

Introduction

When leaseholders exercise their statutory right to extend their lease or purchase their freehold, it often initiates a complex and potentially adversarial process. 

There are procedures involved in determining the price of a lease extension or freehold enfranchisement claim through the First-Tier Tribunal (property chamber) and when it becomes necessary to resort to this route.

Formal Notice

Upon serving a formal notice of claim on the freeholder, the landlord has 2 months to respond with a counter-notice proposing alternative terms, including price. 

It's common for landlords to request higher sums at this stage. 

Subsequently, negotiations ensue, typically facilitated by surveyors representing both parties. If an agreement cannot be reached, either party can refer the case to the Tribunal for determination.

Counter Notice

Once the landlord's counter-notice is received, the parties have between 2 and 6 months to negotiate the premium before a Tribunal application must be made. 

During this period, the Tribunal issues written directions outlining deadlines for exchanging valuation calculations, agreed facts, and expert reports.

While most cases are settled before reaching the expert report exchange deadline, those that proceed involve considerable preparation for a Tribunal hearing.

Hearing

The Tribunal hearing involves a Judge and an expert valuer evaluating evidence presented by both parties, allowing for cross-examination and questioning. 

Professional representation is essential, with valuers expected to attend and defend their expert reports. Depending on the complexity of the case, barristers may also act as advocates. Hearings can vary in duration, from a few hours to several days, depending on case intricacies.

Odds

Despite the potential for a costly process, relatively few lease extension and freehold enfranchisement claims escalate to a Tribunal hearing. While some cases necessitate a Tribunal application to incentivize settlement and avoid further expenses, most are resolved through negotiation. 

Commercially-minded parties often opt for compromise to mitigate escalating costs. However, in complex cases with significant sums in dispute, a Tribunal hearing may be deemed proportionate.

Costs

It's worth noting the typical costs associated with a Tribunal process. Solicitors' fees for application and bundle preparation range from £1,500 to £2,000 for simple cases. Surveyors' fees for expert reports could be around £1,000 to £2,000, with additional costs for attending the hearing. Barristers' fees may also be substantial, particularly for contentious cases.

Summary

In summary, while the Tribunal process offers a route to resolve lease extension and freehold enfranchisement disputes, it's often a last resort due to associated costs. 

Most cases are settled through negotiation, reflecting parties' inclination towards compromise to avoid the expense and uncertainty of a Tribunal hearing. However, in cases warranting thorough examination and where significant sums are at stake, a Tribunal hearing may be deemed necessary for a fair resolution.