Shortly before Christmas, the House of Lords heard a long-awaited case which has implications for many landlords and their tenants. It denied an appeal by the Earl of Cadogan and others against a well reported ruling in which landlords were denied the right to claim an element of ‘hope value’ when their tenants bought out their leaseholds under the right to buy legislation.
Strictly, the judgment is not all good news for tenants. The Lords did rule that hope value is not payable in claims for the freehold under the Leasehold Reform Act 1967 or in lease extension claims or for participating tenants under the Leasehold Reform, Housing and Urban Development Act 1993. However, hope value is to be taken into account in the valuation in so far as it is attributable to the possibility of non-participating tenants seeking new leases of their own flats. A non-participating tenant is a tenant who is not part of a collective scheme for obtaining enfranchisement of a leasehold (i.e. where the tenants of a block of flats decide collectively to purchase the freehold).