First-tier Tribunal Sets Freehold Interest Price Under Leasehold Reform Act

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case reference : CHI/43UL/OAF/2024/0003

Property : Horseshoe Cottage, Grayswood Common,

Grayswood, Haslemere, Surrey, [POSTCODE]

Applicant: [redacted]

Respondent: [redacted]

Type of application : Determination of the amount to be paid into

Court for the freehold interest under the

Leasehold Reform Act 1967, where the

Landlord cannot be found

Tribunal member : [NAME] of decision : 22 November 2024

DECISION

© CROWN COPYRIGHT

Decision of the Tribunal

The Tribunal has determined for the reasons set out below that the price payable by the Applicant for the freehold reversion of the property is £216,927.

Background

1. By an order made by Judge Dobson sitting as a Judge of the County Court exercising the jurisdiction of a District Judge sitting at [ADDRESS], [POSTCODE] on 8 May 2024 the Court issued a Vesting Order under section 27 of the Leasehold Reform Act 1967 for the sale of the freehold of the Property to the Claimants on such terms as may be determined by the First-tier Tribunal.

2. By the same Order the Court directed that the matter be transferred to the First-tier Tribunal to determine the price payable for a conveyance under the provisions of Section 21 of the Leasehold Reform Act 1967.

3. The Applicant indicated that she was content with a paper determination.

4. An inspection of the property has not been made by the Tribunal, such having neither been requested by the Applicant nor considered necessary or proportionate by the Tribunal.

5. In accordance with Tribunal Directions, the Applicant provided a hearing bundle, which extended to 129 electronic pages.

6. The Applicant relies upon a valuation report prepared by Mr [APPELLANT] of [NAME], assisted by Ms [NAME] of the same firm, dated 5 September 2024.

7. These reasons address in summary form the key issues raised by the Applicant and the response of the first Respondent. The reasons do not recite each point referred to in submissions but concentrate on those issues which, in the Tribunal’s view, are critical to this decision. In writing this decision the Chairman has had regard to the Senior President of Tribunals Practice Direction – Reasons for Decisions, dated 4 June 2024.

The Lease

8. The property is identified on the HM Land Registry plan edged red under title number SY158034. Registration is in the name of the Applicant.

9. The property is held by way of a lease dated 17 February 1825 for a term of 200 years from 29 September 1824. The lease is subject to a yearly rent of one shilling, the modern day equivalent, according to Mr [NAME], being £0.04p. Parties to the lease are (1) [NAME], (2) [APPELLANT], (3) [APPELLANT] and [APPELLANT].

10. The Applicant purchased the leasehold interest in the property on the 24 August 2018 for a consideration of £100,000.

The Law

11. Section 27(5) of the Act provides:

The appropriate sum which in accordance with Section 27(3) of the Act to be paid in to Court is the aggregate of:

a. Such amount as may be determined by (or on appeal from) the appropriate Tribunal to be the price payable in accordance with Section 9 above; and

b. The amount or estimated amount (as so determined) of any pecuniary rent payable for the house and premises up to the date of the Conveyance which remains unpaid.

12. Section 9 of the Act sets out in detail the assumptions to be made and the procedure to be followed in carrying out the valuation. The effect of Section 27(1) is that the valuation date is the date on which the application was made to the Court.

13. Various methods of calculating the valuation of the freehold are set out in Section 9 of the Act. Mr [NAME] values the property under subsection 9(1) of the Act. The Tribunal agrees with such approach on the basis that on 31 March 1990 the Rateable Value of the house and premises was unlikely to exceed £500.00.

The Property

14. The Tribunal is grateful to the Applicant and their Expert Valuer for providing a comprehensive description of the property, accompanied by photographs, and particulars of the comparable evidence relied upon.

15. The property, as described by the Applicants’ expert, is located in the Grayswood area of Haslemere, Surrey, an affluent area well served by shopping and recreational amenities, and with good road and rail links.

16. The property is located off an unmade no-through track accessed from [ADDRESS] and forms the left hand of a pair of semi-detached cottages, situated adjacent a car dealership/garage. Grayswood Common is directly to the front and south of the property.

17. The property is constructed of brick and stone beneath a hipped tiled roof and is believed to date from the early 19th century, reconfigured in or around the 1930’s. Windows are upvc double glazed casements.

18. Accommodation comprises, at ground level, an entrance hall, living room with gas fire, WC/utility room, galley kitchen with base units, and three double bedrooms, a family bathroom and separate WC on the first floor. The floor area is said to be 98.5 m2.

19. The property is said to be connected to mains water, gas, electricity and drainage.

20. The property occupies a rectangular plot with a small front garden and a rear garden sloping downwards away from the house. There is a summer house and a timber garden shed.

21. The property has a tarmacadam driveway providing off-road parking for one vehicle but no garage.

22. Mr [NAME] stated that, externally, the property is in reasonable repair, having appeared to have benefitted from routine maintenance. However, despite caveating his report with the point that he has not undertaken a survey of the property, Mr [NAME] goes on to opine that, as a result of “a number of slipped and broken tiles” the roof is nearing the end of its life and will require renewal within five years.

23. Internally, Mr [NAME] described the property as unmodernised, with dated fittings and decorative finishes. Mr [NAME] suggests that any buyer would undertake a programme of refurbishment to include replacement bathroom and kitchen fittings, upgraded services and redecoration throughout.

24. Mr [NAME] explained that access to the property is via an unmade track off the A286 [ADDRESS] which is owned by a third party. The property is valued on the assumption that there is an unencumbered right of access.

The Valuation

25. In a valuation report dated 5 September 2024 Mr [NAME] determined that the value for the purpose of section 27 of the Act as at 27 March 2024 is £216,927.

26. Mr [NAME] applied to his calculations a valuation date of 27 March 2024, this being the date the Applicant applied to the Court for an Order to acquire the freehold. The Tribunal finds such date appropriate.

27. As at the valuation date Mr [NAME] calculated the unexpired term of the lease as six months and two days. The Tribunal agrees that the unexpired term is 0.5 years.

28. Mr [NAME] capitalises the ground rent, said by him to be 4.5p (4p and 5p elsewhere in his report) at 7%, achieving a sum of two pence. The Tribunal accepts such.

29. In calculating the section 15 modern ground rent Mr [NAME] applied the standing house method. The Tribunal finds this an appropriate methodology to adopt.

30. In arriving at the entirety value Mr [NAME] considered the value of nine similar sized semi-detached properties in the vicinity ranging in achieved sale price from £395,000 to £695,000 over a period commencing June 2021 and ending June 2024. Mr [NAME] identifies the most useful comparable as that of 3 Grayswood Common Cottage, the adjoining semi-detached house which, in April 2023, sold at £550,000. Mr [NAME] explains that whilst the internal accommodation of 2 Grayswood Common Cottage is of a similar size and the mirror image to that of the subject property, the plot occupied by the subject property is smaller and narrower. As such, Mr [NAME] considers the comparable to have potential for extension and therefore is more valuable.

31. Having analysed each of the comparable sales Mr [NAME] arrives at an entirety value of £500,00 for the property as at the valuation date in its current condition. The Tribunal concurs.

32. Mr [NAME] values the fully developed entirety value at £575,000. The Tribunal agrees.

33. In calculating the value of the site, Mr [NAME] first sought out market evidence of sales on development plots of small semi-detached houses. Having identified no relevant evidence, Mr [NAME] adopted the standard methodology of applying a percentage of the fully developed value site. Having referred to previous Tribunal determinations Mr [NAME] applied a figure of 33%, arriving at a site value of £189,750. The Tribunal agrees 33% to be appropriate.

34. Mr [NAME] adopts a 5% de-capitalisation rate to arrive at a section 15 modern ground rent of £9,488. Applying this figure, Mr [NAME] arrives at a capitalised modern ground rent of £168,952.72.

35. Finally, Mr [NAME] adopts a deferment rate of 4.75% and calculates the reversionary interest as £47,973.92.

36. Having added each of the constituent parts of the valuation, Mr [NAME] arrived at an enfranchisement price of £216,927.

Tribunal’s Valuation

37. The Tribunal, having considered the information provided in Mr [NAME] report satisfied itself that the figures contained therein are derived from proper analysis of the evidence and apply appropriate methodology. The Tribunal confirm that the appropriate amount to pay for the freehold interest in the subject property is £216,927 (Two hundred and sixteen thousand, nine hundred and twenty seven pounds).

RIGHTS OF APPEAL

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application by email to [EMAIL] to the First-tier Tribunal at the [NAME] office which has been dealing with the case.

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

3. If the person wishing to appeal does not comply with the 28 day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

4. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.