What can the freeholder claim a right to?

The landlord would argue that as long as these areas remain within their ownership they can do what they like, as long as the works do not pose a substantial interference with the tenants’ rights.

Landlords’ development works therefore often become a trigger for the tenants to commence the enfranchisement process under the Leasehold Reform, Housing and Urban Development Act (“the 1993 Act”).

Under the 1993 Act the participating tenants can acquire “the relevant premises” (as defined in the Act) by serving an Initial Notice under section 13, and such initial notice must specify the extent of the freehold premises which are claimed.

Additionally the tenant can claim “any common parts of the relevant premises” where the acquisition of that part is considered “reasonably necessary for the proper management of or maintenance of those common parts”, e.g. those parts of the building that are prime development ground for the landlord.

The landlord is entitled to require a discretionary leaseback of any apartment that is not the subject of a qualifying tenant or any unit or premises that is occupied for business purposes. If successful in their counter-proposals the landlord will be granted a 999-year lease at a peppercorn ground rent.

So what should the tenants do to escape having to grant leasebacks to the landlord of any of his “developments” within the premises?

In short, get organised and serve the s13 Notice as early as possible, preferably before any development works by the landlord have either begun or been completed. Why? Because the recent Upper Tribunal decision in Merie Bin Mahfouz Company (UK) Limited v Barrie House (Freehold) Limited held that to be the subject of leaseback to the landlord any unit/apartment must be in existence and completed at the time when the enfranchisement claim is made.

Any right to a leaseback in favour of the landlord must subsist at the “relevant date” (i.e. the date the s13 Notice is given) and such a right cannot subsist if the unit/apartment itself does not exist at that time. The Tribunal felt it was imperative that one can identify the subject matter of the enfranchisement claim at the outset, including any units/apartments for which leaseback may be available.

Tenants should not have to resort to conjecture about apartments that “might” exist at some time in the future.

And what should landlords do if they want to develop parts of the building? The resounding message was clear; any physical changes they elect to make post service of the s13 Notice are made entirely at their own risk.