First-tier Tribunal Determines Freehold Purchase Price

OUTCOME: Allowed in Part

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case reference : NAT/LON/OOAZ/OLE/2019/0001 Property : 54 [ADDRESS] [POSTCODE] Applicants :

[redacted] : [COUNSEL] Respondent : [redacted] : Not applicable (missing landlord) Type of [NAME] : [NAME] under section 26 and 27 of the Leasehold Reform Act 1967 Tribunal members : Mr [NAME] : 10 [ADDRESS] [POSTCODE] Date of determination : 4th June 2019

DECISION

(1) The Tribunal determines that price to be paid into court in respect of purchase of the freehold of £40,300 less the already court assessed costs of £3,855 equivalent to a sum of £36,445.

(2) The Tribunal approves the draft proposed transfer in form TR1 which has been submitted by the Applicant. Please see section 14 below.

(3) This matter should have been determined on the submitted papers. It was not possible for the Tribunal to do so because of the inadequate expert report

2 filed by the Applicants. The Tribunal directs that no costs incurred as a result of this deficiency should be set-off against the premium payable to the missing landlords.

The Background 1. This is an [NAME] under section 27 of the Leasehold Reform Act 1967 (“the 1967 Act”) pursuant to an order made by Employment Judge Elliot Judge , sitting at the [NAME] at Wandsworth on 28h March 2019.

2. Section 27(1) of the 1967 Act concerns claims for enfranchisement where the relevant landlord cannot be found. It enables the court to make a vesting order in respect of any interests of the landlord which are liable to acquisition.

3. Under section 27 of the 1993 Act, the role of the Tribunal is to determine the appropriate sum to be paid into court in respect of the landlord’s interests and also to approve the form and terms of the proposed transfer.

4. The applicant in this matter is [APPELLANT] [NAME]. She is the qualifying tenant of the house, namely, 54 [ADDRESS] [POSTCODE] (“[NAME]”). The respondent freehold owner is [APPELLANT].

5. On 26th October 2018, the applicant issued a Part 8 Claim at the [NAME] at Wandsworth for an order pursuant to section 27 of the 1967 Act vesting the freehold interest in [NAME] in the applicant. The applicant has been unable to ascertain the whereabouts of the respondent and was therefore unable to serve a notice on him pursuant to Part I of the 1967 Act.

6. The applicant has provided the Tribunal with a valuation report prepared by Mr [NAME] BA MRICS dated April 2019.

7. Mr [NAME] is of the view that the premium to be paid for the freehold interest is £30,000. He confirms at section 3.3 of his report that “ The basis of the valuation has been deemed as 9(1). No rateable value has been evidenced but one considers [NAME] passes the low rent test” 8. The Tribunal is not content with the evidence submitted in the written submission and the valuation prepared by Mr [NAME]. In the opinion of the Tribunal the approach adopted in the valuation fails to satisfy the relevant guidance on undertaking section 9(1) valuations.

3 9. The leading authority on valuation of the freehold interest under the section 9(1) provisions of the 1967 Act is the appeal decision given by the Upper Tribunal in [COMPANY]/170/2010 UT citation UKUT 4LC. There is no reference made by the expert to the guidance offered by UT in this decision. Chapter 9 of Hague, Leasehold Enfranchisement provides further valuation advice and guidance on undertaking section 9(1) valuations that accords with the UT decision. The Determination 10. The Tribunal has prepared an alternative valuation that follows the relevant valuation guidance and this is appended as appendix A.

11. The Tribunal accepts the opinions expressed by Mr [NAME] in his valuation report dated April 2019 included in the bundle at pages P14- P112 save that: (i) A three stage valuation method is adopted. This includes a current freeholder interest value, the capitalised value to freeholder of the S15 rent to be paid after statutory lease extension and the reversionary interest value. (ii) The Tribunal relies in their valuation upon the entirety value proposed by the Expert at £460,000. It also accepts the proposed site apportionment submitted by the expert at section 7.1.1 of his report at a rounded figure of 44%. This is evidenced in the report and is corroborated by guidance provided in Hague (see paragraph 8.10 6th Ed) based upon previous Lands Tribunal decisions. The capitalisation rate of 6% proposed by the expert is accepted. (iii) The Tribunal adopt a decapitalisation rate of 6% to avoid the problem of “adverse differential” addressed in [NAME] v [NAME] for Charities (1973) 26 P & C R 113. (iv) The Tribunal follows the guidance provided in [COMPANY] regards assessment of the value of the tenants residuary rights at the end of the term. A discount of 20% to the standing house value is made to reflect the value of these rights at the expiration of the statutorily extended term.

4 (v) Due to the type, age and style of [NAME] the Tribunal has determined a Haresign addition is not applicable.

12. The adjusted calculation has resulted in a premium of £40,300. A copy of the Tribunal’s valuation is attached to this decision.

13.

Accordingly, the Tribunal determines that the premium to be paid in respect of the freehold of [NAME] as shown on HMLR copy plan title no TGL 146738 is £40,300 less the already court assessed costs of £3,855 equivalent to a sum of £36,445. These monies to be paid into Court.

14. The Tribunal also approves the draft proposed HMLR TRI included in the bundle at pages P144- P147 subject to the inclusion at paragraph 8 “Consideration”, that the consideration (the premium of £36,445) has been paid into court.

15. This matter should now be returned to the [NAME] sitting at Wandsworth under Claim Number EO1WT649 in order for the final procedures to take place. [NAME] 4th June 2019

RIGHTS OF APPEAL

1. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written [NAME] for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. The [NAME] for permission to appeal must arrive at the Regional office within 28 days after the Tribunal sends written reasons for the decision to the [NAME].

3. If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed despite not being within the time limit.

5 4. The [NAME] for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, [NAME] and the case number), state the grounds of appeal, and state the result the party [NAME] the [NAME] is seeking.

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