First-tier Tribunal Determines Lease Extension Premium

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BB/OLR/2021/0258 HMCTS code (paper, video, audio) : V: CVPREMOTE Subject property : [ADDRESS] [POSTCODE] Applicant : [redacted] : Mr [COUNSEL] Respondent : [redacted] : Mr [COUNSEL] of application : Section 48 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal members : Judge S [NAME] of determination and venue : 29 March 2022 at 10 [ADDRESS] [POSTCODE] (Remote) Date of decision : 12 April 2022

DECISION

Covid-19 pandemic: description of hearing This has been a remote video hearing which has been not objected to by the parties. The form of remote hearing was by video V: CVPREMOTE. A face-to-face hearing was not held because it was not practicable and no-one requested the same. The documents that we were referred to are in two electronic bundles totalling 228 pages.

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© CROWN COPYRIGHT

Summary of the Tribunal’s decision

The appropriate premium payable for the new lease of [ADDRESS] [POSTCODE] (“the Flat”) is £51,780. Background 1. This is an application made by the applicant leaseholder, pursuant to section 48 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”), for a determination of the premium to be paid for the grant of new lease of the Flat.

2. By a notice of claim dated 10 August 2020, served pursuant to section 42 of the Act, the applicant exercised the right for the grant of a new lease of the Flat. At the time the applicant held the existing lease granted on 03 January 1979 for a term of 99 years commencing on 03 January 1979. The unexpired term at the date of the notice was 57.4 years The annual ground rent is a fixed £20.00.

3. The applicant proposed to pay a premium of £31,247 for the new lease.

4. On 24 September 2020, the [NAME] served a counter-notice admitting the validity of the claim and counter-proposed a premium of £70,000 for the grant of a new lease. The application 5. On 19 March 2021, the applicant applied to the Tribunal for a determination of the premium to be paid.

6. Directions were given on 28 September 2021. By paragraph 12 of the directions the parties were ordered to agree a bundle of documents relevant to the outstanding issues. It was specifically said that that this should be a single bundle in PDF format. The applicant was ordered to prepare it and send a copy to the Tribunal and the respondent at least two weeks before the hearing.

7. Unfortunately, the applicant failed to comply with this direction. Instead, the Tribunal was faced with no less than four bundles: (1) the applicant’s bundle which included Mr [APPELLANT] report but not that of Mr [NAME], (2) Mr [NAME] report, (3) the appendices to Mr [NAME] report and (4) further photographs relied upon by Mr [NAME].

8. The Tribunal cannot emphasise too strongly that directions as to bundles need to be strictly obeyed. Far too much time was wasted at the hearing by the need constantly to chop and change from bundle to bundle. Matters were made worse by some of the pages having internal manuscript page numbers not corresponding to the PDF numbering. The hearing 9. The hearing in this matter took place remotely on 29 March 2022. The applicants were represented by their expert witness, Mr [RESPONDENT]. The respondent was represented by its expert witness, Mr [RESPONDENT].

10. Neither party asked the Tribunal to inspect the Flat and the Tribunal did not consider it necessary to carry out a physical inspection to make its

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determination.

11. The applicant relied upon the expert report and valuation of Mr [APPELLANT] and the respondent relied upon the expert report and valuation of Mr [NAME] dated 04 March 2022. Location and description 12. The Flat is a self-contained flat on the ground floor of a 2 storey centre terrace Edwardian house. There is one flat on each floor, and as a they have their own front doors they might better be described as maisonettes rather than flats.

13. The Flat consists of three bedrooms, living room, kitchen and bathroom. The total area is 62.50 m²/ 673.00 ft². There is a narrow rear garden, but no garage or immediate on street parking. The road is a cut through between Forest Gate and Stratford. The building is opposite a railway line. Matters agreed between the experts 14. From an agreed statement of facts the following matters were agreed by the date of the hearing: (1) The valuation date is 10 August 2020. (2) The unexpired term at the valuation date was 57.4 years. (3) The ground is fixed at £20 per annum. (4) The gross internal area is 62.50 m²/672.74 ft2 plus garden. (5) The capitalisation rate is 6.5% (6) The deferment rate is 5%. (7) The [NAME] figure is 76.38%. (8) The freehold value has a 1% uplift. The issue 15. The sole issue is the reversionary value of the Flat. The comparables 16. Mr [NAME] relied on the following comparables:

[ADDRESS] £336,000 March 2020 51 m2/549 ft2 [ADDRESS] £333,000 January 2021 74.69 m2/804 ft2 [ADDRESS] £290,000 July 2020 56.3 m2/606 ft2 [ADDRESS] £332,500 May 2021 53.88 m2/580 ft2 [ADDRESS] £380,000 June 2021 59.83 m2/644 ft2 [ADDRESS] £430,000 June 2021 61.62 m2/663 ft2 17. The thrust of Mr [NAME] argument was that each of the comparables was better presented than the Flat and that each of the comparables was in a better location than the Flat. He did not carry out a £ per m2/ ft2 exercise as he thought that

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buyers in the real world were not concerned with the precise measurements of flats.

18. The thrust of Mr [NAME] argument against this was that the evidence of the state of the comparables was dependent upon what had been said by the selling agents and was not necessarily true, and that the comparables were not in a better location than the Flat. For example [ADDRESS] was opposite a filling station and [ADDRESS] was next to a basketball court.

19. Mr [NAME] relied on the following comparables:

[ADDRESS] £385,000 September 2017 62 m2/667.36 ft2 [ADDRESS] £345,000 February 2016 59 m2/635.07 ft2 [ADDRESS] £360,000 July 2020 56.3 m2/505.9 ft2 [ADDRESS] £290,000 September 2020 78 m2/839.59 ft2 [ADDRESS] £405,000 October 2020 46 m2/495.14 ft2 [ADDRESS] £370,000 October 2020 68.4 m2/736.25 ft2 [ADDRESS] £435,000 January 2021 93 m2/1,001.04 ft2 20. As far as these comparables are concerned, the Tribunal does not pay attention to [ADDRESS] and [ADDRESS] as they are too dated. Mr [NAME] did not press [ADDRESS] as being a true comparable. It is very large with an integral garage. [ADDRESS] is not of assistance either as it is a house. Nor are [ADDRESS] and [ADDRESS] as they are two storey maisonettes.

21. Mr [NAME] made adjustments to take into account the different sizes of the comparables to the Flat and the nature of their location.

22. Mr [NAME] was criticised by Mr [NAME] for putting a figure of £450,000 in the statement of agreed matters in October 2021, when at the hearing he relied upon a figure of £375,000 - only £50,000 above the figure put forward by the applicant. It is well established law that the figure the landlord puts in the counter notice does not need to be a genuine figure (in contrast with the figure that the tenant puts in the initial notice). However, as Mr [APPELLANT] pointed out in so many words, the statement of agreed matters is part and parcel of the expert’s report and should not have contained a figure put in solely to bolster the respondent’s case. Discussion 23. We have looked at each of the remaining seven comparables and our reasons for the adjustment of them are at Appendix A .

24. Taking the average of the adjusted figures we reach a reversionary value of £357,000. Conclusion x. We have stated the premium at the commencement of this decision. Our calculations are set out in appendix B attached.

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Name: Judge Simon Brilliant Date: 12 April 2022

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Subject 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 application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case.

The application for permission to appeal must arrive at the regional office within 28 days after the Tribunal sends written reasons for the decision to the person making the application.

If the application is not made within the 28 day time limit, such application 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 application for permission to appeal to proceed, despite not being within the time limit.

The application for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the subject property and the case number), state the grounds of appeal and state the result the party making the application is seeking.

If the Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).

Appendix A

Analysis of comparables

[ADDRESS] area 62.5 sqm Comparable Remarks Sale Price and Date Adjustment Comparable Price Mr [NAME]

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[ADDRESS] 51 sqm, 2 bed, front and rear gardens £336,000 March 2020 +£10,000 Smaller, front & rear gardens, time £346,000 [ADDRESS] 56.3 sqm, 2 bed, first floor, no garden, opposite petrol station £290,000 July 2020 +£30,000 No garden, opposite petrol station £320,000 [ADDRESS] 53.8 sqm, more modern and good sized rear garden, adjacent to outside basketball court £332,500 May 2021 -£1,500 Smaller, bigger garden, location, time £334,000 [ADDRESS] 59.8 sqm, 2 bed, large garden with summerhouse/office £380,000 June 2021 -£30,000 Large garden and summer house, time £350,000 Mr [NAME] [ADDRESS] 47.0 sqm, 2 bed, ex council flat, no garden, no gas central heating £360,00 July 2020 +£30,000 Much smaller, no garden, ex council flat £390,000 [ADDRESS] 78.0 sqm, 2 bed ex council flat, no garden £290,000 Sept 2020 +£25,000 Larger, no garden, ex council flat £315,000 [ADDRESS] 46.0 sqm, 2 bed, garden £405,000 Oct 2020 £0 Smaller, better garden £405,000

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Appendix B Valuation for lease extension

[ADDRESS], [POSTCODE]

Valuation Date 10/08/2020

Lease Commencement 03/01/1979

Lease Term 99.00 years

Unexpired Term

57.40 years

Long Lease value

£357,143

Freehold VP value £360,714 +1% long lease value

Term 1 Term 2 Term 3

Ground rent £20.00 £0.00 £0.00

Reversion years

57.40 0.00 0.00

Capitalisation rate 7%

Deferment rate 5%

Compensation

£0.00

[NAME] 76.38%

Diminution of Landlord's interest

Ground rent £20

[NAME] 57.40 yrs @ 7.00% 13.99176452

£280

Rent Review 1 £0

[NAME] 0.00 yrs @ 7.00% 0

PV of £1 57.40 yrs @ 7.00% 0.[PHONE]

£0

[NAME] £0

[NAME] 0.00 yrs @ 7.00% 0

PV of £1 57.40 yrs @ 7.00% 0.[PHONE]

£0

Reversion to VP value £360,714

PV 57.40 yrs @ 5.00% 0.06077630

£21,923

Value existing freehold

£22,203

[NAME]'s interest on reversion of new lease

FH VP

£360,714

PV 147.40 yrs @ 5.00% 0.00075283

-£272

Landlord's share of Marriage Value

Val. Tenant's interest new long lease £357,143

Val. [NAME]'s interest after reversion of new lease

£272

£357,415

Less

Val. tenant's interest existing lease [NAME] 76.38% £275,514

Val. [NAME]'s interest existing lease £22,203

£297,716

£59,698

Marriage Value at 50% £29,849

Compensation £0

PREMIUM £51,780

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