Flat leaseholders have had the collective right to acquire the freehold to their block of flats since 1993. There is, however, no right to participate and in some cases there may be individual leaseholders who choose not to. Related to this is whether the value of the participating leaseholder’s leases should be carried out on the assumption that they have no statutory rights (the existence of such rights is a factor that must be left out of consideration in valuing the landlord’s interest).
Once not less than one-half of the leaseholders agree to join a claim, notice may be given to the landlord. One of the components of the price payable is “marriage value”, to which the landlord is entitled to a share of 50% for any lease which has an unexpired term of less than 80 years. From the leaseholders’ point of view, the fewer participating leaseholders who would pay a marriage value, the better. Landlords will be concerned that the non-participants will not be tempted into an agreement that they will be entitled to join in later, which would deprive the landlord of some of the marriage value that would otherwise be payable. Hence section 18 of the Leasehold Reform, Housing and Urban Development Act 1993, which requires any such agreement to the landlord – in effect an anti-avoidance measure. Concerns over potential unfairness to landlords seemed to a factor in the House of Lords deciding that “hope value” is payable in respect of any non-participating leaseholder (Sportelli v Cadogan [2008]).
This is one of the issues decided in the recent (and complex) decision of the Upper Tribunal in 82 Portland Place (Freehold) Ltd v De Walden Estates Ltd [2014] UKHT 0133.
