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Why Threatened New Tribunal Fees Are Unfair To Leaseholders19th Aug 2015

by Nick Leedham on 19th Aug 2015

Contact Nick Leedham

Buying the freehold? Can’t agree a price with the freeholder? You could be paying an extra £2,400 in tribunal fees if the government has its way.

Under the new Court and Tribunal Fees consultation, the Ministry of Justice is threatening to impose costly new charges for what at present is free.

This would have a substantial negative impact on leaseholders…and not just in terms of costs. It also undermines their leverage when negotiating with freeholders.

After all, the freeholders can hold out for a further £2,400 – knowing it would be disproportionate for the leaseholders to challenge it.

That is not a level playing field.

So as specialist residential leasehold solicitors with UK-wide experience, we are writing in protest to Justice Secretary and Lord Chancellor Michael Gove, copying in our local MPs.

Our concerns focus specifically on paragraph 123 on page 28 of the 46-page consultation: the sums proposed relating to collective enfranchisement (buying your freehold) – £400 to commence the proceedings and a further £2,000 for a hearing.

The government may believe that £2,400 in fees will not impact on freehold price negotiations – not when Leasehold Advisory Service data suggests the average sum involved is £142,000.

We disagree.

Firstly, this is an average purchase price figure. At the time of proceedings being commenced, the parties have usually negotiated somewhat – so the price of the freehold will be somewhere between two figures.

For example, the freeholder could be looking for £20,000 but the leaseholders are advised that £15,000 is the correct price.

Secondly, we know from experience that £142,000 is an average sum that has been pushed up by prime central London freeholds.

It does not accurately reflect what is happening elsewhere. Freeholds outside the capital change hands for significantly less – so £2,400 in fees would have a bigger impact.

Sadly, there is a depressing air of inevitability about tribunal charges for residential leasehold cases.

Charges have been introduced for employment tribunals and hiked for other areas of the law such as divorce and County Court possession claims.

So it would be naïve to believe that residential leasehold matters will remain exempt from charges.

But a blanket £2,400 is excessive. In our letter to the Secretary of State and the local MPs, we will be recommending a sliding scale of charges based on the amount of money in dispute.

All cases of leasehold enfranchisement are brought by leaseholders under a right enshrined in law.

Having that right is pointless if ministers then make it too expensive to exercise.

Also, it is important to note that the freehold purchase procedure requires compliance by the leaseholders at numerous relevant junctures.

If the price is not agreed within a certain time frame, the leaseholders MUST commence tribunal proceedings – otherwise the entire procedure fails.

Unlike employment, divorce or other County Court claims, there is therefore less choice as to whether or not to commence those proceedings.

Purchasing the freehold requires specialist legal knowledge – as does extending the lease. For more information, contact Associate Solicitor Nick Leedham, for more information, 01202 355697.

This document is not intended to constitute and should not be used as a substitute for legal advice on any specific matter. No liability for the accuracy of the content of this document, or the consequences of relying on it, is assumed by the author. If you seek further information, please contact Managing Partner Neil Andrews at Coles Miller Solicitors LLP.