First-tier Tribunal Determines Lease Extension Premium

OUTCOME: Dismissed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BK/OLR/2023/0233 Property : 9 Woodford House. 88-90 [ADDRESS] [POSTCODE] Applicant : [redacted] : [NAME] [COUNSEL] (Est Man) [NAME] Respondent : [redacted] : [NAME] [COUNSEL] [NAME] of [NAME] : Lease extension – Leasehold Reform Housing and Urban Development Act 1993 Tribunal members : Judge [NAME] [NAME] : 10 [ADDRESS] [POSTCODE] Date of hearing Date of decision : 17 October 2023

8 December 2023

DECISION

2 Decisions of the tribunal 1. The tribunal determines the premium for the surrender and regrant of the lease of [ADDRESS] [POSTCODE] is £157,400.00 (one hundred and fifty seven thousand, four hundred pounds). The [NAME]

2. This is an [NAME] pursuant to section 48 of the Leasehold Reform, Housing and Urban Development Act 1993 (‘the 1993 Act) seeking the tribunal’s determination as to premium payable for the surrender and regrant of the lease for the subject property situated at Flat 9 Woodford House. 88-90 [ADDRESS] [POSTCODE] (‘the Flat’). Background 3. In the Notice of Claim dated 9 September 2022, served by the applicant pursuant to section 42 of the 1993 Act asserted the premium payable for the grant of a new lease is £50,000. In a Counternotice dated 16 November 2022 the respondent asserted the premium payable is £150,000. The issues 4. The parties agreed:

(i) Date of valuation is 9 September 2022; (ii) Unexpired term is 52.04 years; (iii) Capitalisation rate of 6%; (iv) Deferment rate of 5%; (v) Deduction for Act World Rights is 6.5%; (vi) The terms of the new lease.

5. The issues remaining for the tribunal’s determination at the date of the hearing were agreed by the parties as:

(i) The unimproved freehold vacant possession value; (ii) The unimproved long leasehold value; (iii) Relativity and (iv) The premium payable.

6. Following the Statement of Agreed Facts and the valuations from each party’s valuers, the applicant claims the value of the premium payable is £116,475. The respondent’s position after valuation is that the premium payable is £194,375.

3 The hearing 7. An oral hearing was held by way of video at which the tribunal was provided with a hearing bundle comprising 188 (electronic) pages. The applicant was represented by [NAME] [APPELLANT] (Est Man) [NAME] and who spoke to and was questioned on his expert report dated 20 September 2023. The respondent was represented by [NAME] [RESPONDENT] [NAME] who spoke to and was questioned on his expert report dated 27 September 2023. Reasons for the tribunal’s decision 8. In reaching its decision the tribunal took into account all of the oral and documentary evidence provided to the tribunal. On balance, the tribunal preferred the evidence of [NAME] [NAME] to that of [NAME] [NAME]. The tribunal were informed [NAME] [NAME] had not in fact inspected the subject property for himself and relied on the report of a colleague as the basis of his expert opinion on the premium payable. This was in contrast to the approach taken by [NAME] [NAME] who told the tribunal he had carried out an inspection of the Flat himself. Consequently, the tribunal found [NAME] [NAME] evidence to be less persuasive than that of [NAME] [NAME], as the former was based on ‘hearsay’ evidence in respect of a central issue i.e. the condition of the Flat and its value, rather than his own observations and expert opinion.

9. In his report [NAME] [NAME] made adjustments to his 7 long leasehold comparable transactions for time adjusted using the Savill’s Index as of September 2022; the floor level; modernisation; and services. [NAME] [NAME] told the tribunal the subject Flat was a small walk up to the flat on the fourth (top) floor of the building in which the common parts were poor and in need of refurbishment and the Flat in need of modernisation and did not receive the same Porter and lift services as that of some of the comparable properties.

10. [NAME] [NAME] accepted the best evidence of the existing lease value is the actual sale of the Flat around the valuation date at £515,000 which is reduced to £481,525 in the ‘no Act world’ and equates to a relativity of 72.19% and corresponds with the [NAME] graph that should be used in the absence of market evidence and is the relativity figure he used in his valuation.

11. In his report [NAME] [NAME] relied upon 4 comparable properties and took the average of the adjusted price per square foot to arrive at a long leasehold value of the Flat in an unimproved condition of £804,815. [NAME] [NAME] stated as the sale of the Flat took place only 18 days after service of the section 42 notice, he applied a 6.5% discount to the sale price of the Flat to reflect ‘no Act’ rights. [NAME] [NAME] did not consider it necessary to make any adjustments for time. [NAME] [NAME] stated that in his opinion the Flat was in a reasonable condition and disagreed with [NAME] [NAME] assessment of the need for modernisation. [NAME] [NAME] compared the short lease value

4 of the Flat to his assessment of the Freehold vacant possession value in order to arrive at a relativity figure of 59.24%.

12. The tribunal however determined that the correct approach was to review each comparable provided by the parties and make individual adjustments for each rather than [NAME]. [NAME] approach of taking an overall average with only minimal or no adjustments. The tribunal’s table of comparable properties is attached to this decision.

13. The tribunal felt that [NAME]. [NAME] [NAME] of the cost to update the kitchen and the bathroom was considerably higher than that which should be applied. [NAME]. [NAME] asked [NAME]. [NAME] during the hearing whether he felt his adjustments were excessive to which [NAME]. [NAME] said he did not think they were. The tribunal tends to agree with [NAME]. [NAME] in that we thought they were excessive and as such the tribunal has reduced the amount to be discounted for modernisation where applicable.

14. With regards to adjustments, [NAME]. [NAME] took to the other extreme on the [ADDRESS] comparable deciding to make no adjustments for a property that has additional services and aspects to the property. [NAME]. [NAME] argued that these would be captured in the service charge and as such would not need adjusting in the valuation. The tribunal disagreed with this approach and adjusted this property to remove the added value provided by these aspects.

15. As there was comparable evidence to support this valuation, the matter of relativity is not of primary concern for the tribunal and have based their valuation on the evidence provided to them by both parties.

16. Appended to this decision is the tribunal’s valuation together with the review of the comparables properties provided and subsequent adjustments made by the tribunal on these.

17. In conclusion, the tribunal determines the premium payable for the surrender and grant of a new lease of the Flat is £157,400 (rounded) as per the tribunal’s valuation attached.

Name: Judge Tagliavini Date:

8 December 2023

5 Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. 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 [NAME] which has been dealing with the case. The [NAME] for permission to appeal must arrive at the [NAME] within 28 days after the tribunal sends written reasons for the decision to the [NAME]. 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. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).