First-tier Tribunal Rules on Lease Extension Sum

OUTCOME: Allowed

© CROWN COPYRIGHT 2019

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00AE/OLR/2019/0131 Property : [ADDRESS] [POSTCODE] Applicant : [redacted] Mr [COUNSEL] (2) Representative : [NAME] Respondent : [redacted] Mrs [COUNSEL] (2) Representative : None Type of Application : S51 Leasehold Reform, Housing and Urban Development Act 1993 – determination of the appropriate sum and terms of the new lease Tribunal Members : Judge [NAME] (EstMan) FRICS Date and venue of Determination : 12 [ADDRESS] [POSTCODE] Date of Decision : 14 March 2019

DECISION

2 The issues before the tribunal and its decisions 1. The issues before the tribunal were: 1.1 The amount of the appropriate sum to be paid into court as provided for in s51 Leasehold Reform. Housing and Urban Development Act 1993 (the Act); and

1.2 The terms of the new lease.

2. The decisions of the tribunal are: 2.1 The appropriate sum is £10,185.00 made up as shown on the tribunal valuation appended to this decision; and

2.2 The terms of the new lease shall be those set out in paragraph 23 below.

3. The reasons for these decisions are set out below.

NB Later reference in this Decision to a number in square brackets ([ ]) is a reference to the page number of the hearing file provided to us for use at the hearing.

Title and procedural background 4. [ADDRESS] is a 1920’s style 3-bedroom semi-detached house of standard construction beneath a pitched tiled roof.

5. The freehold interest is registered at HM Land Registry with title number P35550. On 29 March 1988 the respondents were registered as proprietors [69].

The Charges Register includes a Schedule of notices of leases and records the grant of two leases out of the freehold interest:

Title number NGL678222 [ADDRESS]: FFF Lease dated: 21 November 1990. Term granted: 99 years from 25 March 1990 (the Property)

Title number NGL678223 [ADDRESS] Lease dated: 21 November 1990. Term granted: 99 years from 25 March 1991

6. On 27 March 2014 the applicants were registered at HM Land Registry as the proprietors of the lease of the Property [73]. The register records the price stated to have been paid was £150,000 [74].

7. On 6 December 2017 the applicants (as claimants) issued proceedings in the County Court at Willesden (Claim Number D03W1284) [7] in which they sought a vesting order pursuant to s50(1) of the Act on the basis that the respondents are a missing landlord.

8. On 12 March 2018 Deputy District Judge Harmer sitting at the County Court at Willesden made an order pursuant to s51(1) of the Act that: “… the Claimants to apply to the First-tier Tribunal Property Chamber in

3 order to extend the lease as per the provisions of section 51(1) of [the Act].”

9. S51(3) of the Act provides that where a lease is to be granted pursuant to a vesting order under s50(1), then on the tenant paying into court the appropriate sum there shall be executed by [NAME] as the court may designate a lease which is approved by the appropriate tribunal so as to give effect to the matters therein set out.

10. S51(5) of the Act provides that the appropriate sum to be paid into court is such amount as may be determined by the appropriate tribunal to be the premium which is payable under Schedule 13 in respect of the grant of the new lease, such other sums as may be payable by virtue of the Schedule and any amounts or estimated amounts determined by the tribunal as being, at the time of execution of that lease, due to the landlord from the tenant under the tenant’s existing lease or any agreement collateral thereto.

11. On 23 January 2019 the tribunal received an application pursuant to s51 of the Act. This tribunal is the appropriate tribunal for the purposes of determining the application.

12. Directions were duly issued. Pursuant to those directions we have been provided with a bundle of relevant materials.

13. We infer that the court order made 12 March 2018 was intended to lead to a determination by this tribunal of the appropriate sum to be paid into court and to approve to the terms of the new lease to be executed by [NAME] as may be designated by the court.

The appropriate sum to be paid into court 14. At [35] there is a revised report by Mr [NAME] of [NAME] which is dated 11 March 2019. The report is broadly compliant with rule 19.

15. We are satisfied on the evidence provided that Mr [NAME] is suitably qualified to make the report and that he understands his professional duty to the tribunal.

We have gone through the report carefully. We are satisfied that Mr [NAME] has identified the key issues he is to address and that he has gone through a methodical approach to arrive at his valuation, applying appropriate professional standards. In many respects we find his report falls within an acceptable valuation tolerance. We agree with the rates he has adopted and his approach to a relativity using an average of five appropriate graphs, a practice commonly adopted at the valuation date of 6 December 2017. The relativity thus arrived at is 93.21%.

16. Mr [NAME] has relied upon five comparables. The first is the subject Property, a converted one-bedroom first floor flat, whereas the

4 remaining four are all ground floor flats of which two are purposed built and another is a two-bedroom conversion.

17. We find the most appropriate and helpful comparable is the subject Property which sold in March 2014. This is because the only adjustment required is for time. Mr [NAME] has used an appropriate HM Land Registry index to produce a time adjusted existing lease value of £202,474. Adopting Mr [NAME] relativity, that produces a freehold value of £217,223.

18. All of the other four comparables require some extra adjustments some of which are significant and subjective but no evidence has been provided which might support them. For example, there are no sales particulars or information about layout or quality of fittings.

19. However, the comparable with the least adjustments is [ADDRESS] and Mr [NAME] has calculated a freehold value of £218,338. IN our view this supports the time adjusted value for the subject property.

20. We therefore arrive at a premium of £10,185 as shown on the tribunal valuation appended to this decision.

21. As to s51(5)(b) no evidence of any ground rent or service charge arrears or other sums payable under the lease has been put before us. The evidence before us is the effect that no landlord has taken any active interest in the Property for many years. In these circumstances and having regard to the current formal requirements concerning demands for ground rent and to the provisions of the Limitation Act 1980 we find that there are no other sums payable under s51(5)(b) of the Act.

22. We therefore determine the appropriate sum to be paid into court is £10.185.

Draft new lease 23. The draft new lease proffered by the applicants commences at [92]. That draft is approved subject to the following amendments:

[94] LR7 The premium to record is £10,185 (Ten thousand one hundred and eighty-five pounds)

[97] Premium The premium to record is £10,185 (Ten thousand one hundred and eighty-five pounds)

[97] Term Delete ’12 March 2018’ and insert ‘6 December

2017; Delete ‘11th March 2143’ and insert ‘24th March 2179’

[97] Clause 1.2 Delete ‘landlord and tenant’ and insert ‘Lessor and

Lessee’

5

[98] Clause 4.3 (a) Delete ‘11th March 2142’ and insert ‘24th March

2178’

Judge John Hewitt 14 March 2019

ANNEX - RIGHTS OF APPEAL

1. 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.

2. 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.

3. 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.

4. The application 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 making the application is seeking.

6 TRIBUNAL VALUATION 102A ST. JOHN'S ROAD, WEMBLEY, [POSTCODE] (Main details as per valuation provided, p. 65, and as substituted)

Existing lease value: £202,474 Extended lease value: £215,074 Freehold value: £217,223

Capitalisation of Ground Rent

£ 1,151

Reversionary value Freehold: £217,223 PV 71.30 years @ 5% 0.03085

£ 6,701

£ 7,852

Less Value of freeholder's proposed interest £217,223 PV 161.30 years @ 5% 0.00038

£ 82

Freehold value

£ 7,770

Marriage value

Extended lease

£215,074 Freeholder's interest

£ 82

Less Existing lease value

£202,474 Reversionary value

£ 7,852

Marriage value

£ 4,830

50%

£ 2,415

Premium

£10,185