THE SPORTELLI APPEAL

The House of Lords handed down the Sportelli decision on the 10th December 2008.

The appeals concerned whether a landlord could claim "hope value" as part of the price payable under the Leasehold Reform Act 1967 or the Leasehold Reform, Housing and Urban Development Act 1993.

What is "hope value"?

When a landlord sells the freehold at a time when the tenant is not in the market, the value of the freehold interest can, in some cases, be increased because of the hope of a possible future sale of the freehold or an extended lease to the tenant, thereby enabling marriage value to be added to the price. That increase is known as "hope value".

The Decision

The House of Lords held that:

Hope value is not payable in the case of houses under the 1967 Act.

Hope value is not payable in the case of a new lease of an individual flat under the 1993 Act.

Hope value is not payable in the case of participating tenants in a collective enfranchisement under the 1993 Act.

Hope value could be payable in the case of non-participating tenants in a collective enfranchisement under the 1993 Act.

What does it means for Leaseholders?

With the current downturn in property prices and the decision relating to hope value it now may be more affordable to enfranchise the freehold.

What does it means for Landlords?

Overall, the Sportelli litigation has been favourable to Landlords, with the decisions relating to marriage value particularly so. Where tenants are seeking to extend the lease and are not participating tenants, hope value may be payable.

For more information, or to talk to us about helping you with your enfranchisement matters please contact Ken Besfor on 020 8680 5000 or e-mail simon.cook@ormerods.co.uk.