A leaseholder has served a formal notice to extend their lease and the first question from many freeholders is a commercial one: can freeholders recover legal costs? Usually, yes – but only certain reasonable costs, and only within a defined legal framework. Getting this wrong can create avoidable disputes, delay completion and leave both sides frustrated.
For residential lease extensions in England and Wales, the route used matters. A statutory claim gives the landlord a right to recover specified professional costs from the leaseholder. An informal deal is more flexible, but its costs position depends on what the parties agree. The distinction is simple in principle, yet bills often become contentious when the scope of work, hourly rates or requested payments have not been made clear early enough.
When can freeholders recover legal costs?
Where a qualifying leaseholder follows the statutory lease extension process under the Leasehold Reform, Housing and Urban Development Act 1993, the landlord can recover their reasonable costs of dealing with the claim. This is not a blank cheque. The leaseholder is not automatically responsible for every expense the freeholder or managing agent incurs.
In broad terms, recoverable costs can include the reasonable legal work needed to investigate the tenant’s right to extend, respond to the initial notice and complete the new lease. They can also include reasonable valuation costs for assessing the premium and advising on the terms of the claim.
The purpose is practical. A freeholder should not be out of pocket merely because a leaseholder exercises a statutory right. Equally, the recoverable-cost rules are intended to stop a statutory claim becoming burdened by open-ended professional fees.
The word to focus on is reasonable. Reasonableness applies to both the nature of the work and the amount charged. A straightforward extension of a well-documented flat should not attract the same level of legal time as a disputed title, an absent-intermediate-landlord issue or a complex portfolio structure.
Legal work that is commonly recoverable
A freeholder’s solicitor will normally need to review the tenant’s notice, check the lease and title, establish who must be involved, advise on the statutory timetable, prepare and serve the counter-notice, negotiate the lease wording and complete the documentation. Those are the core legal steps connected with granting the extension.
If the freeholder has appointed a managing agent to administer the matter, an administration charge may also be requested. That does not make it automatically payable. The charge must be permitted by the lease or legislation, reasonably incurred and reasonable in amount. A vague management fee added on top of solicitors’ fees is an area that deserves scrutiny.
Valuation costs are separate, but often recoverable
The freeholder’s surveyor may inspect the flat, consider comparable evidence and calculate a proposed premium. Their reasonable professional fee is generally recoverable under a statutory claim, even if the parties later negotiate a different premium.
The landlord is entitled to obtain proper valuation advice. However, commissioning unnecessary extra reports or charging for work unrelated to the lease extension is difficult to justify. Clear instructions and a defined fee scope help avoid escalation.
What freeholders usually cannot recover
The statutory right to recover costs does not normally extend to the expense of negotiating the premium itself. In other words, the leaseholder may pay for the landlord’s valuer to provide the initial valuation advice, but is not generally liable for every subsequent hour spent arguing over the figure.
The same broad principle applies to tribunal proceedings. If the premium, terms or costs cannot be agreed and the matter goes to the First-tier Tribunal, each party will usually meet its own representation costs. The tribunal has limited powers to make costs orders for unreasonable conduct, but this is the exception rather than the standard outcome.
That creates an important commercial discipline for both parties. A freeholder should avoid treating a lease extension as a cost-profit centre, while a leaseholder should not assume that challenging every invoice carries no financial risk or delay. A sensible negotiated outcome is often cheaper than a prolonged argument, even where each side feels strongly about the valuation.
Statutory versus informal lease extensions
A statutory extension has a structured timetable and a defined costs regime. Once the tenant’s notice has been served, the freeholder needs to act carefully and on time. Missing the deadline for a counter-notice can have serious consequences, including the risk that the tenant applies to court for an order on favourable terms.
An informal or negotiated extension is different. The parties can agree the premium, new lease length, ground rent arrangements, timetable and responsibility for costs. Freeholders often ask the leaseholder to cover their legal and valuation fees as a condition of proceeding. That can be commercially reasonable, but it should be agreed expressly before substantial work begins.
Informal deals can be quicker and more flexible. They can also produce poor outcomes if the leaseholder accepts terms without comparing them with their statutory entitlement. For freeholders, the benefit of flexibility should not come at the expense of clear written terms. Confirm who is paying for what, whether fees are capped and whether any payment is refundable if the transaction does not complete.
How to keep recoverable costs fair and defensible
The simplest way to reduce challenge and delay is to make the costs position transparent from the outset. A landlord or managing agent should provide a clear estimate or schedule showing the expected legal fee, valuation fee, VAT and any administration charge. If an unusual issue develops, explain why additional work is needed before the bill grows.
Fixed fees can work well for routine lease extensions because they give both sides certainty. Where a fixed fee is not suitable, a capped fee with agreed exceptions is often a sensible middle ground. It protects the freeholder from genuinely complex work while giving the leaseholder visibility of their likely exposure.
Freeholders should also keep their advisers focused on the statutory task. Duplicated correspondence, repeated internal reviews and unnecessary attendance at negotiations can be hard to defend if costs are challenged. A well-organised file, accurate title information and prompt instructions will lower professional time and support the case that charges are reasonable.
For leaseholders, asking for a breakdown is not confrontational. It is a sensible part of managing a significant property transaction. Check whether the invoice relates to work required to process the extension, whether VAT has been shown correctly and whether the work appears proportionate to the matter. If there is a genuine disagreement, early discussion can prevent a procedural dispute from taking over the whole transaction.
Can a freeholder ask for payment upfront?
Under the statutory procedure, a landlord can require a deposit towards the premium after receiving the tenant’s notice. This is separate from professional costs. The deposit is normally 10% of the premium proposed in the tenant’s notice, subject to a minimum of £250, and is credited against the eventual price.
Freeholders may also seek payment on account of costs in appropriate circumstances. The precise position depends on the stage of the claim and the statutory provisions being relied upon. Rather than sending a broad demand, it is better to identify the basis for the payment, the work it covers and what happens if the claim is withdrawn or does not complete.
A request for funds should never be used to stall a valid claim. Statutory deadlines continue to matter, whether or not there is a debate about an invoice. Good administration means progressing the notice, valuation and legal work in parallel while keeping the costs record clear.
What leasehold reform may change
Leasehold reform remains an active area, and the Leasehold and Freehold Reform Act 2024 includes measures intended to change how lease extension costs are allocated. Not every reform takes effect immediately or in the same way, so freeholders and leaseholders should not assume that a future rule already applies to a live claim.
For now, the safest approach is to establish the applicable law at the date the notice is served, then manage the claim to that framework. This matters particularly for portfolios with cases starting months apart. A process that was correct for one flat may need adjusting for the next.
A smoother route for both sides
Lease extensions do not need to become a dispute about invoices. Freeholders are entitled to recover reasonable statutory costs, but transparent pricing, disciplined professional instructions and prompt communication protect that entitlement far better than an unexplained bill at the end.
For landlords managing multiple residential interests, a structured process also reduces internal workload and keeps asset decisions moving. Lease Plus 90 helps bring valuation, legal coordination and landlord engagement into a clearer managed route, so the commercial terms and the administration can progress with less unnecessary friction.
If a cost request feels unclear, deal with it early. A short, specific conversation about scope and reasonableness is usually far easier than untangling positions once deadlines, fees and expectations have all moved on.
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