Lease Extensions – A change in tribunal fees may mean a change in negotiation tactics

As of 25 July 2016, the First Tier Tribunal (Property Chamber) Fees Order 2013 statutory instrument came into force.

While hardly a headline grabbing name for a piece of secondary legislation, it could have an impact on you if you are a leaseholder, and certainly if you are thinking of extending your lease in the near future.

What does it mean?

The process under which a leaseholder can acquire a lease extension (actually a new lease) is under a statutory regime with various deadlines. If, however, the leaseholder cannot agree with the competent landlord as to what premium is payable for the lease extension, then the leaseholder and landlord can apply to the First Tier Tribunal (Property Chamber) to decide what premium is payable.

As the leaseholder is the party that would lose out if they do not apply to the tribunal, it is they who often make applications to the tribunal and the recent statutory instrument now means there are additional fees to pay for that application.

If an application is made, a fee of £100 is immediately payable, and a further fee of £200 is payable as soon as a notice of a hearing is given. Practically, the tribunal often do not wait any substantial amount of time to list a hearing.

The introduction of tribunal fees adds a slightly different dynamic to negotiations, in that the £300 is generally not recoverable (and most tribunal applications tend to settle before a hearing anyway) and slightly shifts the onus (depending on the value of the premium) onto the leaseholder to approach negotiations with the new fee structure in mind. It will also help leaseholders and landlord’s (and surveyors) alike to concentrate minds where the gap between offers is a small sum and can be easily be bridged by taking into account the £300 tribunal fees.

If you would like further information on lease extensions and the process, please contact our one of our experts, Louise Benning, Alexandra Kirk or Edward Thompson on 0203 814 2020.