Understanding Costs and Chargeable Considerations in Lease Enfranchisement Transactions

When landlord’s statutory costs are excluded from LTT

For Land Transaction Tax, a leaseholder’s payment of a landlord’s costs is not always taxable. If the payment is a genuine reimbursement of the landlord’s costs under section 9(4) of the Leasehold Reform Act 1967 or section 33 of the Leasehold Reform, Housing and Urban Development Act 1993, it is not treated as chargeable consideration. However, the premium or other price paid for the freehold, lease extension, or lease grant still counts for LTT.

• This rule applies only to certain statutory lease grants, lease extensions, and enfranchisement claims.
• Only the landlord’s qualifying costs under the named legislation are excluded from chargeable consideration.
• Any premium, purchase price, or other payment for the property interest remains chargeable for LTT unless another relief applies.
• The key practical step is to separate the amount paid for the land interest from the amount paid for the landlord’s statutory costs.
• If documents do not clearly identify costs and premium, it can be harder to apply the correct LTT treatment.
• Calling a payment “costs” does not by itself take it outside LTT; it must genuinely fall within the statutory costs rules.

Scroll down for the full analysis.

When lease enfranchisement costs are not counted as chargeable consideration for LTT

This page explains a narrow but important point in Land Transaction Tax (LTT): when a leaseholder pays a landlord’s legal or other costs as part of a statutory lease grant, lease extension, or enfranchisement, those payments are not always treated as chargeable consideration. That matters because only chargeable consideration is brought into the LTT calculation.

What this rule is about

In some statutory leasehold claims, the tenant or leaseholder must meet certain costs incurred by the landlord. A practical question then arises: are those costs part of the price paid for the land transaction, and therefore taxable, or are they outside the LTT charge?

The source material deals with a specific exception. It applies where the buyer meets the landlord’s costs in connection with the grant, extension, or enfranchisement of a lease under particular statutory provisions.

What the official source says

The official material states that where the buyer pays the landlord’s costs in relation to:

• section 9(4) of the Leasehold Reform Act 1967, or
• section 33 of the Leasehold Reform, Housing and Urban Development Act 1993,

those costs are not chargeable consideration for LTT purposes.

However, other payments made for the grant, extension, or enfranchisement are chargeable consideration. So the exemption is limited to the landlord’s qualifying costs under those statutory provisions. It does not remove the rest of the premium or other consideration from charge.

What this means in practice

If a leaseholder is buying the freehold, extending a lease, or obtaining a statutory grant under one of the provisions above, the amount paid to the landlord will often include different elements. Some amounts may be the price for the interest being acquired. Other amounts may reimburse the landlord for costs that the legislation says the tenant must meet.

This rule says that the landlord’s costs, if they fall within the specified statutory provisions, are left out of the LTT calculation. By contrast, the premium or other payment for the property right itself remains chargeable consideration.

In practical terms, that means the parties need to separate out:

• the amount paid for the land interest, and
• the amount paid to cover the landlord’s statutory costs.

If those amounts are not clearly identified, it may be harder to work out the correct LTT treatment.

How to analyse it

A sensible way to approach this is to ask the following questions:

• Is the transaction a grant, extension, or enfranchisement of a lease?
• Is it taking place under section 9(4) of the Leasehold Reform Act 1967 or section 33 of the Leasehold Reform, Housing and Urban Development Act 1993?
• Is the payment in question truly a payment of the landlord’s costs under that statutory framework?
• Or is it actually part of the premium, price, or other consideration for the property interest being acquired?
• Are the figures separately identified in the claim, agreement, completion statement, or conveyancing papers?

The key point is that the exclusion is for qualifying costs, not for all sums paid to the landlord. If a payment is consideration for the transaction itself, it remains within the LTT charge unless another rule says otherwise.

Example

Illustration: a leaseholder acquires the freehold under a statutory enfranchisement procedure. They pay one amount as the price for the freehold and a separate amount to reimburse the landlord’s professional costs that are payable under the relevant statutory provision. On the basis of the official material, the price for the freehold is chargeable consideration, but the reimbursed landlord’s costs are not.

Why this can be difficult in practice

The difficulty is usually not the rule itself, but classification. A payment described informally as “costs” is not automatically outside LTT. The question is whether it is genuinely the landlord’s costs of the kind covered by the specified legislation.

Problems can arise where:

• the documents do not clearly split premium and costs;
• the transaction includes payments outside the statutory costs regime;
• there are additional sums payable under negotiation that are not truly reimbursement of costs; or
• the transaction is an enfranchisement or lease extension, but not under one of the statutory provisions named in the source.

The source also indicates that separate rules apply to the calculation of liability on enfranchisement more generally. So this page only addresses the treatment of the landlord’s qualifying costs, not the whole LTT calculation for enfranchisement transactions.

Key takeaways

• Landlord’s costs paid by the buyer under section 9(4) of the 1967 Act or section 33 of the 1993 Act are not chargeable consideration for LTT.
• Other payments for the grant, extension, or enfranchisement remain chargeable consideration unless another rule applies.
• The practical issue is to identify and evidence which amounts are statutory landlord’s costs and which amounts are the price for the property interest.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Costs and Chargeable Considerations in Lease Enfranchisement Transactions

View all WRA LTT Guidance Pages Here