First-tier Tribunal Sets Enfranchisement Premium for Flats

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AE/OCE/2023/0119 Property : 26-29 [ADDRESS] [POSTCODE] Applicant : [redacted] : [COUNSEL] of [NAME] Respondent : [redacted] : [COUNSEL] of [NAME] of [NAME] : Section 24 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal members : Judge [NAME] of hearing and venue : 3 [ADDRESS] [POSTCODE] Date of decision : 14 May 2024

DECISION

Summary of the tribunal’s decision (1) The appropriate premium payable to the [COMPANY] for the collective enfranchisement is £32,500. The premium payable to the [COMPANY] for the freehold of the additional property is £500. Background 1. This is an [NAME] made by the [NAME] pursuant to section 24 of the Leasehold Reform, Housing and Urban

2 Development Act 1993 (“the Act”) for a determination of the premium to be paid for the collective enfranchisement of 26-29 [ADDRESS] [POSTCODE] (‘the property’).

2. By a notice of a claim dated 12 January 2023, served pursuant to section 13 of the Act, the applicant exercised the right for the acquisition of the freehold of the subject property and proposed to pay a premium of £23,600 for the freehold interest and £500 for the additional freehold specified in paragraph 2 of the said notice of claim.

3. On 20 March 2023, the [NAME] served a counter-notice admitting the validity of the claim and counter-proposed a premium of £265,910.00 for the freehold and £265,910.00 for the additional freehold shown shaded blue on the plan attached to the Initial Notice.

4. On 06/09/2023 the applicant applied to the tribunal for a determination of the premium and terms of acquisition. The issues Matters agreed 5. The following matters were agreed: (a) The building is a two storey detached property with an

uninspected flat roof (but potentially with water tank),

communal garden to rear beyond which is a garage forecourt

with four garages, block of 3 and single garage. The garages are

accessed via a service road that runs to the north of the building.

Immediately to the North of the service road is an area of land

which adjoins the railway line. There is a communal entrance to

the front of the building providing access to the internal

common parts (including staircase) from which all four flats are

accessed. (a) The valuation date is 12 January 2023: (b) Details of the tenants’ leasehold interests:

Flat 1 (and garage) : Title No AGL 345146 granted 4" June 2015

expiring 23" June 2141 paying £50 per annum fixed ground rent

Flat 2 (and garage) : Title NGL 386051 for 99 years from 24"

June 1980 paying £50 per annum fixed ground rent

Flat 3 (and garage) : Title No AGL345148 granted 4" June 2015

expiring 23" June 20141 paying £50 per annum fixed ground

rent

Flat 4 (and garage) : Title No AGL 345147 granted 4" June 2015

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The participants shown in the claim Notice are:

Flat 1 [COMPANY] No 04781307

(incorporated 30”” May 2003)

Flat 3 —[COMPANY] No 14201396

(incorporated 28” June 2022)

Flat 4 [COMPANY] No 04781307

(incorporated 30” May 2003)

The flat types are as follows:

Flat 1: (also known as No 26) 8 453ft? 1-bed ground floor flat

plus garage

Flat 2: (also known as No 27) a 657ft? 2-bed ground floor flat

plus garage

Flat 3: (also known as No 28) a 499ft? 1-bed first floor flat

plus garage

Flat 4: (also known as No 29) a 734ft? 2-bed first floor flat plus

garage

Communal rear garden areas available to all flats

(c) Capitalisation of ground rent: 61/2% per annum; and (d) Deferment rate: 5% (e) Uplift for freehold compared to long lease value at 1% (f) The terms of transfer Matters not agreed

A. The Freehold Vacant Possession Values of the four flats (and

garages).

B. Whether or not the owner of flat 2 is entitled to a lease expiring 23

June 2140 without payment of premium.

C. Whether or not the enfranchisement price should reflect the

assumption of a lease in place for flat 2 which is for a term expiring 23

June 2140 paying £50 fixed ground rent.

D. The relative value of the lease for flat 2 (as in place at Land Registry

at valuation date) for the purpose of calculating hope value.

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This was agreed between the parties at the hearing as 7.5%

E. The development hope value (if any) of the freehold and its

apportionment.

F. The freehold enfranchisement price. The hearing 6. The video hearing in this matter took place on 3 April 2024. The applicant was represented by Mr [APPELLANT] and the respondent by Mr [RESPONDENT].

7. Neither party asked the tribunal to inspect the property and the tribunal did not consider it necessary to carry out a physical inspection to make its determination.

8. The applicant relied upon the expert report and valuation of Mr [APPELLANT] dated 25 March 2024 in which he gave the premium payable for the freehold as £31,300. The respondent relied upon the expert report and valuation of Mr [NAME] dated 25 March 2023.

9. The parties relied upon an indexed digital bundle of documents comprising 460 pages. The tribunal’s determination 10. The tribunal determines that the premium payable for the freehold of the property is £32,500 and the premium payable for the additional freehold property is £500. Reasons for the tribunal’s determination 11. The tribunal doubted the independence of Mr [NAME] and his objectivity as an expert witness as he stated in his report that:

| find myself in the peculiar position that | am engaged by Ms [RESPONDENT] as

a Director of [NAME] (the Respondent) to provide a response to the

initiating Notice dated 12" January 2023 served by the Applicants,

[COMPANY]. | am also engaged separately by Ms [NAME] to provide guidance on her present and proposed situation within

this document | have to a degree amalgamated that advice. 12. Mr [NAME] also stated:

| have provided two assessments:-

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a) The first assumes that Ms [NAME] will be granted a new tong lease of the premises on

the same basis as the other existing share of freehold owners.

b) The second assessment is of the calculation on the basis of the

leasehold interest as presently existing.

Both of these assessments include the ‘development hope value.’

My valuations are set out at Appendix 10 and on the basis

indicated above these are assessed as:-

a) £909,420 (Nine Hundred & Nine Thousand Four Hundred &

Twenty Pounds

b) £936,100 (Nine Hundred & Thirty Six Thousand One Hundred

Pounds)

13. The tribunal preferred the evidence of Mr [NAME] to that of Mr [NAME]. The tribunal found that the lease for Flat 2 was required to be valued as at the valuation date as the issue of whether or not there had, at any time, been a ‘promise’ to Ms [NAME], the leaseholder of Flat 2 by the [NAME] of a grant of a new lease (extension) at a nil premium, was not within the jurisdiction of the tribunal and therefore, not relevant for the purposes of this [NAME].

14. Consequently, the tribunal concluded Mr [NAME] had compromised the value of his evidence as an independent expert witness on behalf of the [NAME], by also seeking to advance the case for Ms [NAME] in her capacity as the non-participating leaseholder and who was of the stated view, she was entitled to the grant of a new lease at nil premium, Freehold Vacant Possession of the four flats 15. On this issue the tribunal preferred Mr [NAME] approach to that of Mr [NAME], who accepted during the course of the hearing that his FHVP was ‘too high.’ In his report Mr [NAME] stated he had calculated the premium payable for freehold enfranchisement in accordance with the provisions of Schedule 6 of the 1993 Act.

16. In calculating the FHVP value of the four flats, Mr [NAME] summarised the approach taken in his report as:

For 1-bed flats, the range of adjusted values is £232,400 to

£288,320, the average of all is £262,299, and the average

excluding the highest/lowest is £265,592.

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For 2-bed flats, it can be seen that the range adjusted values is

£300,000 to £402,975, the average of all is £353,548, and the

average excluding the highest/lowest is £354,235. 17. Mr [NAME] concluded in his evidence that by taking account of these ranges and averages, and noting the small difference in size between the two subject 1-bed and two subject 2-bed flats, he arrived at the following FHVP values as:

Flat 1: £260,000

Flat 2: £350,000

Flat 3: £270,000

Flat 4: £360,000 Grant of new lease – Flat 2 18. The tribunal preferred the evidence of Mr [NAME] to that of Mr [NAME]. The tribunal found that the lease for Flat 2 was required to be valued as at the valuation date as the issue of whether or not there had, at any time, been a ‘promise’ to Ms [NAME], the leaseholder of Flat 2 by the [NAME] of a grant of a new lease (extension) at a nil premium, was not within the jurisdiction of the tribunal and therefore, not relevant for the purposes of this [NAME]. Flat 2 – Hope Value 19. The parties agreed during the course of the hearing that this was properly reflected at 7.5%. Development Hope Value 20. During the hearing, Mr [NAME] was extensively cross-examined by Mr [NAME], as to how he arrived at the figures he had used in calculating the DHV. At the end of this and in his submissions, Mr [NAME] conceded that on paper there was no DHV but nevertheless maintained he had a ‘gut’ feeling there remained a DHV.

21. Mr [NAME] stated in his valuation report that:

Wembley is identified within the Mayor’s London Plan as an

‘Opportunity Area’ with potential for the construction of some

14,000 new homes.

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The adopted Brent Local Plan for the period 2019-2041 confirms

this and at Page 36 (BP1} confirms the policy for homes in this

area as;-

(d) a minimum of 13,700 homes are to be constructed in the

period to 2041 which will predominantly be achieved through a

residential lead, mixed use development within the Wembley

Growth Area and will deliver over 15,000 homes principally

the [ADDRESS].

(e) intensification and higher residential densities will be

supported around [ADDRESS] where it can be demonstrated

that the development would take advantage of the areas good

access to public transport. 23. Mr [NAME] set out in his report details of the figures used for demolition and construction costs to calculate DHV having regard to RICS (Building Cost Information Service; the Community Infrastructure Levy for the London Borough of Brent; The requirement for parking; the

requirements for a disability component in the communal floor space of

any proposed new building; the developers risk and profit; the

availability of loans through the Government offered Home Building

Fund and recently sold or currently available flats on an assessment f

gross development value.

22. The tribunal was satisfied that, on the balance of probabilities, Mr [NAME] had demonstrated in his written and oral evidence there was no value to be attached to the DHV. The tribunal found this viewed was effectively shared by Mr [NAME] in his concession at the end of his cross- examination by Mr [NAME], that on paper there was no DHV. The premium 23. Its valuation calculation is annexed to this decision ([NAME] – is there

a valuation I can attach?)

Name: Judge Tagliavini Date: 14 May 2024

Appendix: Valuation setting out the tribunal’s calculations

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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).

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