First-tier Tribunal Determines Premium for Collective Enfranchisement with Missing Landlord

OUTCOME: Allowed

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference :

LON/00AH/OCE/2020/0075

HMCTS code (paper, video, audio) :

P: PAPERREMOTE Property : 188 [ADDRESS] [POSTCODE] Applicant : [redacted] Ms [COUNSEL] (2) Representative : [NAME] (Solicitors) Respondent : [redacted] : Missing Landlord Type of [NAME] : Section 24 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal members : Mr [NAME] Date of determination and venue : 3 June 2021 at 10 [ADDRESS] [POSTCODE] Date of decision : 3 June 2021

DECISION

2 Covid-19 pandemic: description of hearing This has been a remote hearing on the papers which has been consented to/ by the parties. The form of remote hearing was P:PAPERREMOTE. A face-to- face hearing was not held because it was not practicable and all issues could be determined on paper. The documents that the tribunal were referred to are in a bundles of 104 pages, the contents of which the tribunal have noted. The order made is described at the end of these reasons. Summary of the tribunal’s decision (1) The appropriate premium payable for the collective enfranchisement is £20,040. Background 1. This is an [NAME] made by the qualifying tenants pursuant to section 26 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) for a determination of the premium to be paid for the collective enfranchisement of 188 [ADDRESS] [POSTCODE] (the “property”) where the Landlord is missing.

2. By an [NAME] to the County Court at Central London made on 17 April 2020 served pursuant to section 26(1) of the Act, the applicant exercised the right for the acquisition of the freehold of the subject property and proposed to pay a premium to be determined by the appropriate tribunal.

3. The order dispensed with the requirement for service on the respondent as the court was satisfied the respondent could not be found.

4. On 6 May 2020, the applicant applied to the tribunal for a determination of the premium. The issues 5. In the absence of the Respondent no matters were agreed. A bundle from the consisting of 104 pages was submitted to the tribunal including an expert valuation report prepared by Mr [NAME] of [NAME]. The initial valuation was dated September 2019 and a revised valuation dated 16 April 2020 was also submitted. From the documents submitted the tribunal finds the following matters (a) The subject property is a two-storey mid-terrace house dating from the early 20th-century which has been converted into 2 flats.

3 (b) The valuation date is the date of the [NAME] to the court i.e. 17 April 2020; (c) Details of the tenants’ leasehold interests: (i) The ground floor flat 188A Dunstan’s Road is let on lease for a term of 99 years from 29 September 2005 at an initial ground rent of £100 per annum doubling every 33 years. (ii) The 1st floor flat, 188B Dunstan’s Road is let for a term of 99 years from 26 July 2005 at an initial ground rent of £100 per annum doubling every 33 years. (d) The tribunal finds that the capitalisation rate for the ground rents is 6.5%; and the Deferment rate: 5%. (e) The leases have more than 80 years to run so no marriage value is payable. The hearing 6. The hearing in this matter took place on 3 June 2021 on the papers.

7. The tribunal was not asked to inspect the property and the tribunal did not consider it necessary to carry out a physical inspection to make its determination. Extended lease and freehold values 8. The Applicants valuer presented evidence of sales of similar one- bedroom flats in the locality and values ranging from £410,000- £555,000. Details were presented of a number of the comparables. Mr [NAME] considers that the ground floor flat would be more valuable having the benefit of the garden. Additionally, he reflected the original layouts of the flats and discounted the double glazing installed by the leaseholder in the 1st floor flat. He concludes that the extended lease values of the 1st floor flat is £465,000 and the ground floor flat is £495,000. The freehold value in each case is 1% higher. The tribunal’s determination 9. The tribunal has considered the evidence presented and considers that the values used by Mr [NAME] are supported by the evidence on which they are based. The tribunal therefore accepts the valuations. Capitalisation and deferment rates 10. Mr [NAME] has used a capitalisation rate of 6.5% as he considers that the ground rents of £100 per annum doubling every 33 years are relatively standard and there is no reason to depart from a normal rate.

4 11. In respect of the deferment rate again he sees no reason to depart from the [NAME] rate of 5%. The tribunal’s determination 12. The tribunal has considered the arguments presented and sees no reason to disagree with the evidence presented. A capitalisation rate of 6.5% will be used and the deferment rate of 5%. Development potential 13. Mr [NAME] considers that there is some development potential attributable to the first-floor flat where he considers there is potential to extend the flat into the roof space. He considers that an ensuite bedroom in the loft space might add £80,000 to the value of the flat but at a cost of £60,000. This creates an additional value to the flat of £20,000 and he considers that the freeholder would be able to demand 50% of that value. Given the uncertainty of when or if this might occur he values this at 5% giving further £500 additional value to the freeholder.

14. The tribunal has considered this argument but is not persuaded by it. The tribunal notes from the lease that the roof space is not demised to the leaseholder. Such a scheme would require revision of the lease terms in addition to the building costs. The tribunal is not therefore persuaded that the case for an addition for development potential is made out. The premium 15. The tribunal determines the appropriate premium to be Ground Flo0r 188A £10,229 First Floor 188B £9,810 Total Premium £20,040 16. A copy of its valuation calculation is annexed to this decision.

Name: [NAME]: 3 June 2020

Appendix: Valuation setting out the tribunal’s calculations

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 regional office which has been dealing with the case. 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]. 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).

6 Address Case Reference Valuation Date 16 April 2020 Existing lease Expiry Date 28 September 2104 Years unexpired 84.45 Existing Ground Rent £100 Basis of review Date of 1st review 29 September 2038 Years to 1st review 18.45 Length of period 33 Rent at 1st review £200 Date of 2nd review 29 September 2071 Years to 2nd review 51.45 Length of period 33 Rent at 2nd review £400 Date of 3rd review Years to 3rd review -120.29 Length of period Rent at 3rd review Freehold value £499,950 Extended lease value £495,000 Capitalisation Rate 6.50% Deferment Rate 5.00% Term Value Term 1 Ground rent 100.00 £ [NAME] 18.45 Years @ 6.50% 10.5718 PV of £1 0 Years @ 6.50% 1.00

1,057 £ 1st review Ground rent 200.00 £ [NAME] 33.00 Years @ 6.50% 13.4591 PV of £1 18.45 Years @ 6.50% 0.31

842 £ 2nd review Ground rent 400.00 £ [NAME] 33.00 Years @ 6.50% 13.4591 PV of £1 51.45 Years @ 6.50% 0.04

211 £ Term Value 2,110 £ Reversion value Reversion to freehold value £499,950 Pv of £1 84.45 Years @ 5.00% 0.01624

Reversion value 8,119 £ Total Premium payable 10,229 £ [ADDRESS] Information LON/00AH/OCE/2020/0075

7 Address Case Reference Valuation Date 16 April 2020 Existing lease Expiry Date 25 July 2104 Years unexpired 84.27 Existing Ground Rent £100 Basis of review Date of 1st review 24 July 2038 Years to 1st review 18.27 Length of period 33 Rent at 1st review £200 Date of 2nd review 24 July 2071 Years to 2nd review 51.27 Length of period 33 Rent at 2nd review £400 Freehold value £469,650 Extended lease value £465,000 Capitalisation Rate 6.50% Deferment Rate 5.00% Term Value Term 1 Ground rent 100.00 £ [NAME] 18.27 Years @ 6.50% 10.5159 PV of £1 0 Years @ 6.50% 1.00

1,052 £ 1st review Ground rent 200.00 £ [NAME] 33.00 Years @ 6.50% 13.4591 PV of £1 18.27 Years @ 6.50% 0.32

852 £ 2nd review Ground rent 400.00 £ [NAME] 33.00 Years @ 6.50% 13.4591 PV of £1 51.27 Years @ 6.50% 0.04

213 £ Term Value 2,117 £ Reversion value Reversion to freehold value £469,650 Pv of £1 84.27 Years @ 5.00% 0.01638

Reversion value 7,694 £ Development value - £ Total Premium payable 9,810 £ Premium Payable for A and B 20,040 £ [ADDRESS]22 Basic Information LON/00AH/OCE/2020/0075