Part 2 - Leasehold enfranchisement and extension Section 39: Costs of enfranchisement and extension under LRHUDA 1993
Section 39 replaces the separate costs regimes for collective enfranchisement and lease extension claims under the LRHUDA 1993. The new regime is contained in new Sections 89A, 89B, 89C, 89D, 89E, 89F, 89G and 89H.
	New Section 89A sets out the general rule that neither a tenant, nor a former tenant, nor the nominee purchaser is liable for any costs incurred by another person because of a collective enfranchisement or lease extension claim, and introduces some exceptions to the general rule. Subsection (4) prevents arrangements to the contrary. But the general rule does not apply to litigation costs awarded by the court or tribunal (subsection (8)). Subsections (5) and (6) allow tenants, former tenants and nominee purchasers involved in a collective enfranchisement claim to agree between themselves how to split their costs. A former tenant and their successor in title may also agree how to split their costs (subsection (7)). Subsection (9) cross-refers to Section 15(7) of the LRHUDA 1993, which governs the nominee purchaser’s liability for costs where their appointment as nominee purchaser terminates. Subsection (10) clarifies what is not included under "costs" and subsection (11) defines "former tenant" and "nominee purchaser" for the purposes of new Section 89A. Subsection (12) cross-refers to prohibitions on recovering enfranchisement costs via a service charge (see Sections 62 and 64 in Part 4).
	New Sections 89B and 89E set out an exception to the general rule in collective enfranchisement and lease extension claims where the claim ceases for a reason other than a "permitted reason", as defined in the new Sections. Where the criteria are met in a collective enfranchisement claim, the nominee purchaser, the participating tenants and some former participating tenants are jointly and severally liable to pay the reversioner a prescribed amount. Where the criteria are met in a lease extension claim the tenant is liable to pay the competent landlord a prescribed amount.
	New Sections 89C and 89F set out an exception to the general rule in collective enfranchisement and lease extension claims where the price payable for the freehold or extended lease is below a prescribed amount. Where the costs incurred by the reversioner or competent landlord are reasonable and do not exceed the prescribed amount, the nominee purchaser (in collective enfranchisement claims) or the tenant (in lease extension claims) is liable to pay the difference between the price payable and the costs incurred. Where the costs incurred by the reversioner or competent landlord are reasonable and exceed the prescribed amount, the nominee purchaser (in collective enfranchisement claims) or the tenant (in lease extension claims) is liable to pay the difference between the price payable and the prescribed amount.
	New Section 89D set out an exception to the general rule in collective enfranchisement claims where the freeholder is required to accept a leaseback of a unit and incurs costs as a result. Where the criteria are met, the nominee purchaser is liable to pay the freeholder a prescribed amount.
	With respect to collective enfranchisement claims, new Section 89G gives the Secretary of State and Welsh Ministers the power to set out the circumstances in which the reversioner is required to pay part of the prescribed amount received under new Sections 89B or 89C to other affected landlords. With respect to lease extension claims, the Secretary of State and Welsh Ministers may set out the circumstances in which the competent landlord is required to pay part of the prescribed amount received under new Sections 89E or 89F to other affected landlords.
	New Section 89H prevents any arrangement from having effect to the extent that it requires a tenant or nominee purchaser to pay security for the costs of a collective enfranchisement or lease extension claim. However, where new Section 89D (costs of leasebacks) applies, new Section 89H provides that the tribunal may order a nominee purchaser to pay an amount to the freeholder or the tribunal in anticipation of that person’s costs.