Collective enfranchisement and lease extension applications can be costly, both in terms of premium and advisers’ fees. Accepting the cheapest quotation can sometimes backfire. A good negotiator may cost more but could save you thousands of pounds.
Choosing Your Adviser
The correct choice is essential. You need to be sure the surveyor or the solicitor chosen is proficient in managing a claim and able to demonstrate knowledge and experience. This could be reduced to two crucial factors:
A solicitor: should be a member of The Law Society.
A surveyor: should be a member of The Royal Institute of Chartered Surveyors (RICS).
Visiting either The Law Society or RICS website will give you the confidence of knowing there is a governing body to manage the individual you have employed in the event of dispute or incorrect advice.
The fee process typically breaks down into categories. For surveyors these are:
Valuation and allocation of premium/proportioning of premium
usually fixed fee Negotiation
generally a variable fee Leasehold Valuation Tribunal representation as Expert Witness
fees are variable within known parameters.
When quoting, the surveyor should be able to provide you with a fixed price for initial advice. For negotiation, it is more difficult to provide a fixed quote and you should be wary if one is given. Larger claims are invariably more complicated but it is not unsurprising that some smaller claims can lead to lengthy negotiations: maybe due to points of law or a lack of evidence on which to base your valuation and therefore contrasting opinions of value.
Pricing this element of negotiation, particularly in small cases, is difficult. Surveyors will either offer negotiations on an hourly rate (you should seek an initial cap). Your surveyor should update you during negotiations. On larger claims, fees are normally incentive based. In negotiations, a surveyor will be an advocate negotiating in your best interests. The advantage of an incentive fee arrangement is the greater the savings (or gains) is to both adviser and client's advantage.
However, at Leasehold Valuation Tribunal representation is as Expert Witness and fees are fixed or on hourly rate. Your adviser should be able to advise you during the course of negotiations (probably not before that stage) of the likely cost of proceeding to Tribunal. The surveyor should advise you the amount for the adaptation of the initial report and daily rate for attending Tribunal.
Solicitor's costs broadly also fall into four categories being:
The Notices (and collation of qualification information and preparing a participation document).
The administration of the claim.
The LVT, if appropriate. Completion of transfer of the freehold or agreement of a new lease. Again, stages 1, 2 and 4 are likely to be able to be subject to fixed fees within set parameters. Dependent on the claim, item 3 is more difficult to quantify at the outset.
Before choosing an adviser, seek confirmation of how familiar the practice is with the legislation or how many cases it has handled. If you have not been recommended to someone, you may wish to ask for a reference. Invariably, if recommended to a practice, this strongly indicates somebody is satisfied with the advice given.
When starting out as a tenant, budget based on the upper limits of premium. A valuer will provide you with two valuations, firstly a realistic low figure within the parameters and second an upper valuation. This latter is what the valuer can realistically see a Tribunal being satisfied with, having heard expert evidence on the correct premium figure. Most parties, landlords or tenants, tend to view the middle ground of those two valuations as the correct figure. This is not necessarily the case as opposing parties (landlords or tenants) will both have upper and lower valuations but they are based on opinion and those valuations may not necessarily overlap. Thus when budgeting you must budget upon the higher figure your adviser has advised you if a tenant, or the lower if you are a landlord.
Leasehold Valuation Tribunal - Commercial Decisions
Although the LVT is designed to be more informal and cost effective than court, the costs involved in terms of representation can be disproportionate to the premium being paid. It is important before seeking a determination by the LVT that all factors are considered, you need to be afforded the opportunity to consider whether the offering of costs to the other side may settle a case. For example, where a landlord is seeking a premium of say £12,000 and you are only prepared to offer £10,000, it is likely that a bid at the midpoint at this late stage will achieve settlement. Both parties' costs are likely to be in the region of £2,000. In order to make it worthwhile going to a Tribunal in this example a tenant would need the LVT to determine at £8,000 and the landlord at least £14,000 to achieve the same amount after costs.