What Is A Tenant’s Improvement?

The current law allows any tenant (with some exceptions) who has lived in a property for more than 3 years under a lease of more than 20 years to apply to the landlord to purchase the freehold. The purchase price is based on the open market value of the property.

The regulations set out in the Leasehold Reform Act 1967 stipulate that the price paid by the tenant to purchase the freehold may be reduced should the tenant have carried out improvements to the property which have increased its value. The Leasehold Reform Act 1967 has been updated several times since its introduction.

In a case brought before the House of Lords, tenants sought to purchase the freehold of a property they occupied as a family home. The property had been let for many years during which time it had undergone considerable change, including the addition of an extra storey.

It had been converted from a family home into flats. The tenants had converted the property back in stages so that it had once again become suitable for single occupancy. The tenants claimed that the reconversion works were improvements to the property that had increased the property value and which, therefore, should be taken into account when calculating the reduction in price of the freehold. There was no dispute relating to the works completed to add the extra storey.

The House of Lords accepted the tenants’ view that improvements within the meaning of the Leasehold Reform Act 1967 meant physical improvements rather than merely economic ones. Had the tenants not undertaken the conversion works, the property would have remained in the same state it had been in under multiple occupancy and would therefore not have been worth as much.

It is worth discussing in detail with your landlord about what improvements could increase the market value of the property with the view that as a tenant, you may wish to purchase the freehold after a number of years. If you are a tenant, you should view the Leasehold Reform Act 1967 so you can understand what constitutes an improvement.

If you have any further queries relating to this matter, or any aspect of landlord and tenant law, please do not hesitate to contact us on 01536 276300.