First-tier Tribunal Sets Enfranchisement Premium for Two Flats

OUTCOME: Dismissed

© CROWN COPYRIGHT

Case Reference

: LON/00BB/OCE/2021/0013

HMCTS : V: CVPREMOTE

Property : 48-50 [ADDRESS], [POSTCODE]

Applicant: [redacted] : [COUNSEL] (Hons) AssocRICS

Respondent: [redacted] : [COUNSEL] (Counsel)

Type of [NAME] : Enfranchisement

Tribunal Members :

Judge Robert Latham

Marina Krisko FRICS

Date and venue of

15 June 2021 at Hearing

: 10 [ADDRESS] [POSTCODE]

Date of Decision : 21 June 2021

________________________________________________

DECISION ____________________________________

The Tribunal determines that the premium payable by the Applicant in respect of the enfranchisement of 48-50 [ADDRESS], [POSTCODE] is £95,734.

Covid-19 pandemic: description of hearing This has been a remote video hearing which has not been objected to by the parties. The form of remote hearing was V: CPVEREMOTE. A face-to-face hearing was not held because it was not practicable and all issues could be determined in a remote hearing. The parties have provided a Bundle of Documents for the hearing which totals 219 pages. No index has been provided.

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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Introduction

1. On 18 January 2021, the Applicant issued its current [NAME] for the Tribunal to determine the premium to be paid and the terms of acquisition of their collective enfranchisement of 48-50 [ADDRESS], [POSTCODE] pursuant to section 24 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”). The Hearing 2. The hearing of this [NAME] took place on 15 June 2021. The Applicant, nominee purchaser, was represented by Mr [APPELLANT] (Hons). He is an associate of the RICS. He was accompanied by Ms [APPELLANT], who is a director of the [COMPANY].

3. The Respondent, landlord, was represented by Mr [COUNSEL] (Counsel) who was instructed by [NAME]. He adduced evidence from Mr [NAME] BA (Hons) MRICS. Both provided written reports and gave evidence.

4. The parties have agreed to the following: (i) Relevant Date for Valuation: 3 September 2020; (ii) [ADDRESS] (first floor): (a) Lease Date: 19 August 1977 for a term of 99 years from 24 June 1976. (b) Ground rent: £22 pa. (iii) [ADDRESS] (grounds floor): (a) Lease Date: 27 June 1986 for a term of 99 years from 24 June 1976. (b) Ground rent: £40 pa, to increase to £80 pa from 24 June 2042. (iv) Unexpired terms: 54.8 years; (v) Relativity: 74.43% (vi) Deferment Rate: 5%. (vii) Capitalisation Rate: 6% (viii) There should be a 1% to the long lease value to determine the FVPV.

5. The following issues are in dispute, the first three of which are linked: (i) The long leasehold value: (a) Mr [NAME] (in his revised valuation) contends for £227,034 for Flat 48; and £260,000 for Flat 50; (b) Mr [NAME] argues for £301,505 for Flat 48; and £303,138 for Flat 50. (ii) The notional freehold value: (a) Mr [NAME] contends for £229,304 for Flat 48; and £260,000 for Flat 50; (b) Mr [NAME] argues for £304,550 for Flat 48; and £306,200 for Flat 50.

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(iii) The short lease value: (a) Mr [NAME] contends for £225,573 for Flat 48; and £260,000 for Flat 50; (b) Mr [NAME] argues for £226,677 for Flat 48; and £227,905 for Flat 50. We have computed Mr [NAME] short lease values on the basis of the agreed relativity of 74.43%. (iv) The value of the “other property”: (a) Mr [NAME] contends that the value is zero; (b) Mr [NAME] argues for £1,000. (v) The premium. Mr [NAME] for £81,726 (namely £37,947 + £43,977 + £0); Mr [NAME] for £100,900 (namely £49,794 + £50,070 + £1,000: £100,864). The Extended Lease Value 6. The subject property at 48-50 [ADDRESS], [POSTCODE] is a mid- terrace two storey terraced property which was constructed with flats. Each flat has its own door. There is a communal path and front garden leading to the front door of each flat. 7. [ADDRESS] is located on the first floor and comprises a ground floor entrance lobby with a staircase leading to the first floor flat which consists of three bedrooms, reception room, kitchen, bathroom and part of the rear garden. Its GIA is 65 square metres (700 sq ft). The lease of this flat is dated 19 August 1977. [APPELLANT] acquired the leasehold interest at auction on 28 January 2020 for £179,000. There was a staircase leading down to the rear garden. This sees to have removed prior to the auction. 8. [ADDRESS] is located on the ground floor and comprises an entrance hall, two bedrooms, reception room, kitchen, bathroom and part of the rear garden. Its GIA is 62 square metres (667 sq ft). The lease of this flat is dated 27 June 1986. Ms [NAME] acquired the leasehold interest on 21 June 2006 for £141,500.

9. In June 2020, Mr [NAME] visited the property. No.48 had been recently refurbished. However, the garden to the rear was in en extremely neglected state (see photo at p.193). No.50 was undergoing complete refurbishment. The Tribunal must ignore any tenant’s improvements in considering its valuation. The leases were granted a number of years ago. It is unclear who removed the steps down to the rear garden. The tribunal must value the flat on the basis that it is still in place. The Submissions of the Parties 10. Mr [NAME] asks us to take the short lease value of the sale of Flat 48 at auction in January 2020 for £179,000 and apply the Savills Enfranchiseable graph percentage of 80.74% to compute a long lease value

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of £221,096. For Flat 50, he asks the Tribunal to have regard to a number of comparables. Two of these are short leases, namely (i) [ADDRESS], which sold on 19 June 2020 for £223,000 with a lease length of 56 years; (ii) [ADDRESS] which sold on 20 March 2020 for £223, 000 with a lease length of 68 years. It is to be noted that both of these sales suggest that the price paid for Flat 48 was an “outlier”. In any event, there is ample evidence of comparable flats sold on long leases. It is therefore unnecessary to make refined and artificial adjustments to flats sold on short leases to assess a long lease value.

11. Mr [NAME] also refers to three comparables, namely [ADDRESS] (a sale for £250,000 in February 2020; (ii) [ADDRESS] (£256,500 in August 2020; and (iii) [ADDRESS] (£236,000 in March 2021). He does not provide full sale details for these properties. [ADDRESS] is some distance from the subject flat and is in a different design. He described [ADDRESS] as “an absolute wreck”. The information relating to this sale had been provided by [NAME]. He did not include any comparable in [ADDRESS].

12. We did not find Mr [NAME] to be a satisfactory expert. His report did not contain the normal declaration that he understood his duty to the tribunal as an independent expert. He did not satisfy us that he understood this obligation. His report included the statement “We struggle to see any value above £260,000 for each subject flat”. The Applicant’s Solicitor included Mr [COUNSEL] initial Valuation Report in the Bundle (at p.124-9). This included comparables at [ADDRESS] (a sale for £319,000 io January 2020) and [ADDRESS] (a sale for £285,000 in November 2019). Mr [NAME] was unable to explain why these had not been included in his final report, save that he had prepared his report in a hurry. He uses the House Price Index for Waltham Forest, rather than that for Newham, the borough in which the subject flat is situated. There were errors in both his Valuation Report and a revised Valuation Report which he provided to the Tribunal.

13. The Tribunal has no hesitation in preferring the expert evidence of Mr [NAME]. In computing the long lease value for [ADDRESS], he has regard to six comparables. We do not have regard to [ADDRESS] as the lease length was 87.94 years. We find the following comparable to be relevant all of which are ground floor flats with two bedrooms: (i) [ADDRESS]: This sold for £285,000 in November 2019 on a 165-year lease. Adjusted for time using the Land Registry Index for Newham, Mr [NAME] suggests a valuation of £288,992. The sale particulars are at p.200- 202. We are satisfied that this is the best comparable and that no adjustments are required. (ii) [ADDRESS]: This sold for £319, 000 in January 2020 on a 120-year lease. Mr [NAME] adjusts this for time to give a valuation of £321,451. He makes no adjustment for condition. The sale particulars are at p.196-7.

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These state that the property has been refurbished and refer to a “stylish kitchen area”. There is a modern bathroom. It has sole use of the rear garden. We make a £20,000 for these factors and an adjusted figure of £301,451. (iii) [ADDRESS]: This sold for £311,214 in March 2021 with a share of the freehold. Mr [NAME] adjusts this for time to give a valuation of £311,214. We make a further 1% reduction to reach a long lease value of £308,102. Mr [NAME] makes no adjustment for condition. The sale particulars at p.201-2. These refer to the flat being “beautifully presented”, a description which is confirmed by the photos. It has sole use of the rear garden. We make a £20,000 for these factors and an adjusted figure of £288,102. (iv) [ADDRESS]: This sold for £277,500 in November 2019 for £277,500 on a 99-year lease. The sale particulars are at p.198-9. Mr [NAME] has applied a 1% uplift to reflect repair work to the kitchen ceiling, revising the sale price to £280,275 and adjusting for time to £284,201. He then makes a further adjustment for lease length which we do not consider to be necessary. We therefore take the adjusted figure of £284,201. (v) [ADDRESS]: This sold for £300,000 in August 2020 on a 124-year lease. He adjusts this for time to give a valuation of £295,912. He makes no adjustment for condition. The sale particulars at p.194-5. The property had been renovated to a high standard with a fitted kitchen and a modern bathroom. It has sole use of the rear garden. We make a £15,000 for these factors and an adjusted figure of £280,912. Taking an average of these five figures, we determine a long lease value for [ADDRESS] of £288.732.

14. In computing the long lease value for [ADDRESS], Mr [NAME] has had regard to five comparables. We do not have regard to three of these because of the short length of their leases, namely [ADDRESS] (81.47 years); [ADDRESS] (83.76 years) and [ADDRESS] (78.64 years).

15. We find the following comparable to be relevant, both of which are three bedroom first floor flats: (i) [ADDRESS]: This sold in April 2020 with a share of the leasehold. The sale particulars are at p.207-8. Mr [NAME] computes the sale price, adjusted for time, to be £301,823. This was sold in an unmodernised condition. We does not consider it necessary to make any further adjustment. We agree. We merely make an adjustment of 1% to compute a long lease value of £298,805. (ii) [ADDRESS]: This sold for £310,000 in October 2020 on a 167-year lease. Mr [NAME] adjusts this for time to give a valuation of £301,823. He

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makes no adjustment for condition. We have the sale particulars at p.205- 6. The flat is described as “well presented”. This is confirmed by the photos which show a modern kitchen and bathroom. We make an adjustment of £20,000 for condition and reach an adjusted figure of £281,823. Taking an average of these two figures, we determine a long lease value for [ADDRESS] of £290,314.

16. We note that both experts suggest that Flat 50, which is on the ground floor, is more valuable that Flat 48 on the first floor. Mr [NAME] seems to suggest that there is a price difference of £33,000. We reach a contrary conclusion, albeit that the price difference is modest. We note that the first floor flat is larger and has a third bedroom. The “Other Property” 17. When the Applicant served its Initial Notice on 3 September 2020, it specified a purchase price of £100 for “Other Property”. In its Counter- Notice, dated 21 October, the Respondent specify a price of £1,000. We are told that the “other property” relates to the forecourt at the front of the property and the roof space. Neither expert suggested that there was any development value. We are satisfied that a modest sum is payable and assess this at £250. Conclusion 18. We make the following determinations on the issues in dispute: (i) The Long Leasehold Value: (a) Flat 48: £290,314. (b) Flat 50: £288,732. (ii) The Notional Freehold Value: (a) Flat 48: £293,217. (b) Flat 50: £291,619. (iii) The Value of the “Other Property”: £250. (v) We determine the premium payable to be £95,734 (namely £47,780 + £47,70 + £250).

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Judge Robert Latham 19 June 2021

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).

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APPENDIX - TRIBUNAL VALUATION

48 LING ROAD, LONDON, [POSTCODE]

Date of Valuation: 3rd September, 2020

Existing lease value £218,241 Extended lease value £290,314 Freehold value £293,217 Relativity 74.43% Ground rent - agreed £351.62 Reversion 54.8 years @ 5% £293,217 0.0690 £20,232 £20,584 Marriage Value Proposed tenant’s interest New landlord’s interest £293,217 £0 Less Tenant’s existing interest Landlord’s existing interest £218,241 £20,584 £54,392

50%

£27,196 Other land £125 Premium £47,905

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50 LING ROAD, LONDON, [POSTCODE]

Date of Valuation: 3rd September, 2020

Existing lease value Extended lease value Freehold value Relativity 74.43% £217,052 £288,732 £291,619 Ground rent – agreed £719.20 Reversion 54.8 years @ 5% £291,619 0. 0690 £20,122 £20,841 Marriage Value Proposed tenant’s interest New landlord’s interest £291,619 £0 Less Tenant’s existing interest Landlord’s existing interest £217,052 £20,841 £53,726 50% £26,863 Other land £125 Premium £47,829