First-tier Tribunal Determines Freehold Interest Price

OUTCOME: Allowed

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Case Reference : BIR/00CN/OAF/2020/0030

Property

: 95 [ADDRESS], [POSTCODE]

Applicants

: [redacted]

: [COUNSEL] [NAME]., with valuation

evidence by [NAME].[RESPONDENT]

Respondent: [redacted] : Application to determine the price payable for the Freehold

interest pursuant to s.9(1) of the Leasehold Reform Act 1967

('the Act') following an application to the County Court under

s.27(5) of the Act where the landlord's identity is [RESPONDENT].

Tribunal Members : [NAME].(Est.Man.) FRICS

V. Ward B.Sc. [APPELLANT] and Venue of : None. Determined by paper submission. [APPELLANT] of Decision : 11th [APPELLANT] 2021

____________________________________________________________

DECISION

___________________________________________________________

© CROWN COPYRIGHT 2021

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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1 The price of the Freehold interest is determined at £4,300 (Four Thousand Three Hundred Pounds) and the Applicant is also required to pay into Court the sum of £150.30 (One Hundred and Fifty Pounds Thirty Pence) comprising six years' ground rent.

REASONS

Introduction

2 The Applicants hold a lease of the property for a term of 99 years from 29th September 1970 at £25.05 p.a. ground rent and wish to acquire the Freehold interest. The demise comprises two parcels, the house and garden for which the reserved rent is £25 p.a. and a smaller parcel 10 feet wide to the rear of the house with reserved rent of £0.05 p.a. but both parcels are granted by the same lease. The Applicants were unable to locate the landlord despite extensive enquiries made by [NAME]. They then applied to the County Court under s.27(5) of the Leasehold Reform Act 1967 ('the Act') for the Freehold to be transferred to them subject to payment of costs into Court.

[ADDRESS] gave Judgment 4th December 2020 requiring the Applicant to apply to the First- tier Tribunal for the price to be determined, together with any unpaid ground rent. (Birmingham County Court Claim No.G01BM146).

4 The Tribunal received the application 14th December 2020. It has been impossible to inspect the property due to Covid restrictions but the Tribunal has considered the Applicants' valuation and finds as follows.

The Law

5 The Tribunal has considered the submitted documents and is satisfied the price of the Freehold interest is to be determined in accordance with s9(1) of the Act.

6 In addition, s.27(5)(b) of the Act requires the Applicants to pay into Court any ground rent unpaid to the [APPELLANT] of conveyance.

Facts Found

7 In reliance on the Applicants' Valuer's Submission, the Tribunal finds the property is a post-War former Council house in a former Council housing estate at Stechford, east Birmingham. It is the end of a terrace of four with front and rear gardens.

8 The accommodation comprises on the ground floor a hall, living room and kitchen and on the first floor two bedrooms, a box room and bathroom.

9 Mr [NAME] makes a 7.5%% deduction in his valuation to reflect 'the existing basic condition' but makes no further reference to condition. However, photographs submitted with the valuation show the front garden has been opened up to provide on-site parking, an enclosed porch has been added, the house appears to have double glazing, a replacement kitchen and replacement flooring in the living room, none of which suggest poor condition and the Tribunal finds as a matter of fact based on this evidence that the house is in reasonable condition.

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Submission and Tribunal Determination on Valuation Points

10 There was no Hearing due to Covid restrictions but Mr [NAME] had provided a written submission.

11 [APPELLANT]

Applicant

Mr [APPELLANT] does not specifically refer to the valuation [APPELLANT].

Tribunal

The Tribunal finds the valuation [APPELLANT] to be the [APPELLANT] of application to Court, 14th July 2020.

12 Ground Rent

Applicant

Mr [APPELLANT] advises that the ground rent comprises £25.00 and £0.05, i.e. £25.05 p.a.

Tribunal

The Tribunal is provided with a copy of the lease dated 4th [APPELLANT] 1971 between [APPELLANT] and Citizens of the City of Birmingham (Landlord) and [APPELLANT] (Tenant) for a term of 99 years from 29th September 1970 at ground rent of £25.05 p.a. fixed for the term. Accordingly £25.05 p.a. is the correct figure.

13 [APPELLANT]

Applicant

Mr [APPELLANT] values the term at 7% due to the low, fixed ground rent.

Tribunal

The Tribunal agrees this is a fair [APPELLANT] to apply in this case for a single

property with fixed rent in this location.

14 [APPELLANT]

Applicant

Mr [APPELLANT] cites sales of six houses in the same general area for comparison:

[APPELLANT] £

[APPELLANT]

[ADDRESS]

137,000

[APPELLANT] 2020

[ADDRESS]

120,000

[APPELLANT] 2020

[ADDRESS]

130,000

[APPELLANT] 2020

[ADDRESS]

135,000

[APPELLANT] 2020

[ADDRESS]

139,500

[APPELLANT] 2020

[ADDRESS]

135,000

[APPELLANT] 2020

He takes an average and values the subject house at £133,000.

Tribunal

The Tribunal has considered the evidence with particular weight applied to the sale of [ADDRESS] and finds the [APPELLANT], in other words, the market [APPELLANT] of a fully developed house on the plot, to have been £137,000 at the valuation [APPELLANT].

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15 [APPELLANT]

Applicant

Mr [APPELLANT] submits that in his opinion the site [APPELLANT] represented 30% of the entirety.

Tribunal

The Tribunal agrees, relying on its own general knowledge and experience.

16 [APPELLANT]

Applicant

Mr [APPELLANT] adopts a deferment [APPELLANT] of 5.25% reflecting Upper Tribunal guidance in [COMPANY] v [NAME] & Nunnington [2017] UKUT 0233(LC).

Tribunal

The Tribunal finds no reason to depart from Upper Tribunal guidance and agrees the deferment [APPELLANT] at 5.25%.

17 [APPELLANT]

Applicant

[NAME] adopts his [APPELLANT] of £133,000 and deducts 7.5% for 'the existing basic condition' and 2.5% for the tenant's security of tenure on lease expiry, per Schedule 10 The Local Government and Housing Act 1989. This produces a standing house [APPELLANT] of £119,000.

Tribunal

The Tribunal finds no evidence to suggest the house was in basic condition and the photographs show the contrary. The Tribunal therefore rejects Mr [NAME] contention for a 7.5% reduction.

Furthermore, the Tribunal finds it unlikely that a tenant in the house now would be likely to claim a tenancy in 99 years' time under Schedule 10 of the 1989 Act, and accordingly rejects Mr [NAME] further 2.5% discount.

Having seen the evidence, the Tribunal finds the [APPELLANT] of the existing house, assuming it to be Freehold with vacant possession, to have been £137,000 at the valuation [APPELLANT].

18 [APPELLANT]

Applicant

Mr [APPELLANT] devalues the standing house [APPELLANT] at 5.25% to assess the 'modern ground rent' per s.15 of the Act, then re-capitalises to assess the present [APPELLANT] of the modern ground rent for the second term.

Tribunal

The Tribunal agrees the basic principle of devaluing the standing house [APPELLANT] to assess the s.15 modern ground rent, but in re-capitalising, Mr [NAME] makes an error by valuing the modern ground rent for 49 years instead of 50 under the Act, and defers by 50 years when it should be 49. The Tribunal assumes this to be a computing error and re-assesses on the statutory basis.

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Decision

19 Based on the inputs above, the Tribunal assesses the price of the Freehold interest under s.9(1) of the Act as follows:

Term 1

Ground Rent

£ 25.05

Years Purchase 49 years @ 7%

13.7668

344

Term 2

[APPELLANT] ([APPELLANT])

£ 137,000

[APPELLANT]

0.30

[APPELLANT]

£ 41,100

S.15 Modern ground rent @ 5.25%

2,157

Years Purchase 50 years @ 5.25%

17.5728

[APPELLANT] £1 49 years @ 5.25%

0.08149

3,088

[APPELLANT]

£ 137,000

[APPELLANT] £1 99 years @ 5.25%

0.00630

863

4,295

s.9(1) Price rounded to

£ 4,300

20 The Tribunal therefore determines the price of the Freehold interest under the Act at £4,300 (Four Thousand Three Hundred Pounds).

21 The Applicants advise that no ground rent demands have been received for at least six years. Accordingly, the Tribunal determines that in addition to the price of the Freehold interest, the Applicants are required to pay into Court the sum of £150.30 representing unpaid ground rent for the six years leading up to the [APPELLANT] of the conveyance.

[NAME].(Est.Man.) [APPELLANT] 11th [APPELLANT] 2021

Appeal to the Upper Tribunal

Any appeal against this decision must be made to the Upper Tribunal (Lands Chamber). Prior to making such an appeal the party appealing must apply, in writing, to this Tribunal for permission to appeal within 28 days of the [APPELLANT] of issue of this decision (or, if applicable, within 28 days of any decision on a review or application to set aside) identifying the decision to which the appeal relates, stating the grounds on which that party intends to rely in the appeal and the result sought by the party making the application.