First-tier Tribunal Sets Freehold Premium at £30,830

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : CHI/20UB/OCE/2024/0021 Property : 34 [ADDRESS] [POSTCODE] Claimants/Applicants : [redacted] (2) [NAME] [COUNSEL] [NAME] :

None

Defendants/Respondents : [redacted] Mr [NAME] (2) Mr [COUNSEL] (3) Ms [COUNSEL] : None Type of Application :

Application under section 26 (1) of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”)

Tribunal Members :

Mr [NAME] of Decision : 20th December 2024

DECISION

CHI/20UB/OCE/2024/0021

2 Decision

1. Tribunal determines that the premium to be paid for the freehold of the property is £30,830.

Background 2. This is an application under section 26 of the Act pursuant to an order made by Judge J Dobson sitting in the County Court at Canterbury on 17th June 2024 (“the Order”), concerning a claim to collectively enfranchise the reversionary freehold interest where the relevant Landlord cannot be found. It enables the court to make a vesting order in respect of any interests of the Landlord which are liable to acquisition.

3. Under sections 26 and 27 of the Act the role of the Tribunal is to determine the appropriate sum to be paid into court in respect of the Landlord’s interests.

4. The property is a terraced house converted into two flats. Mr & [NAME] [NAME] each own a long leasehold interest in one of the flats at the property, known as ground floor flat (Mr [NAME]) and first floor flat ([NAME] [NAME] in her maiden name). The leases are both for 99 years from 25th March 1987. The ground rent for each flat is £5 per annum and the leases have 63.69 years unexpired.

5. An application for a vesting order for the freehold interest was made to the Court on 23rd August 2023.

6. On 16th July 2022 Mr and [NAME] [NAME] had served the requisite notice which fixed the valuation date as 16th July 2022.

7. The Tribunal was provided with a letter from Mr [NAME] of [COMPANY] dated 7th April 2022 assessing the value of the freehold interest at £28,000, but with a caveat that if instructed to negotiate the price he would expect to achieve a settlement at a figure below £32,000.

8. Within his letter of 7th April 2022 Mr [NAME] suggests that the value of the property with a long lease has a fair value of £260,000, possibly as high as £280,000. He states that he has used a relativity of 82.6% in line with the 2015 relativity graph used in [NAME] v [NAME] but suggests he may have to concede a rate of 80.96% in line with the more recent case of Zucconi.

9. The Tribunal was also provided with a lengthier report from Mr [NAME], also dated 7th April 2022, which includes a more detailed description of the property with 3 photographs. This longer report also states that the premium should be £28,000. Neither the report or the letter state what capitalisation rate or deferment rate have been used to calculate the premium and, despite it being requested within the original directions, no calculation sheet was provided.

10. The Tribunal decided that it could not reach a decision without additional and detailed information as to how the expert witness had calculated the price to be paid for the freehold, in particular a calculation sheet.

CHI/20UB/OCE/2024/0021

3 11. Further directions were issued on 9th December 2024 requiring the Applicants to provide the detailed valuation calculation.

12. On 18th December 2024 the additional information was provided to the Tribunal, including a calculation sheet which shows a premium of £28,391 based on a capitalisation rate of 5% and a deferment rate of 5%. The Determination 13. After careful scrutiny the Tribunal accepts the opinions expressed by Mr [NAME] in his valuation report of 7th April 2022 save that the valuation date is 16th July 2022 and, based on the [NAME] graph used in [NAME] v [NAME], a relativity rate of 80.81% is applied. The Tribunal also considers that a capitalisation rate of 5% for such a small ground rent is too low and, relying on its own expert knowledge, applies a rate of 7%.

14. The adjusted calculation adopts the revised parameters as above and results in a premium for the freehold interest of £30,830.

15.

Accordingly, this Tribunal determines that the premium to be paid for the freehold of the property is £30,830.

16. This matter should now be returned to the County Court sitting at Canterbury Claim Number [POSTCODE] 864 in order for the final procedures to take place.

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 to the First-tier Tribunal at the Regional office which has been dealing with the case. Where possible you should send your application for permission to appeal by email to [EMAIL] as this will enable the First-tier Tribunal Regional office to deal with it more efficiently.

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.

CHI/20UB/OCE/2024/0021

4

34 [ADDRESS] [POSTCODE] 20.12.2024 Date of valuation 16/07/2022 Ground rent 1 10.00 £ FH VP 260,000 £ Date of lease expiry 24/03/2086 Term 1 63.69 LH as % Unexpired term 63.69 deferred Long lease value 260,000 £ from my leasehold Ground rent 2 Next rent review n/a Term 2 Relativity as per [NAME] graph 80.81% Unexpired term from review deferred Existing lease value 210,106 Ground rent 3 Term 3 GR Yield 7.00% deferred Rev Yield 5.00% 1. Diminution in value of freeholder's interest Current ground rent Ground rent £10.00 Years purchase 63.69 years at 7.00% 14.0936 £140.94 Total £141 £141 Reversion Unencumbered virtual freehold value £260,000 Deferred for 63.69 years at 5.00% 0.044715 £11,625.91 LESS Reversion after extended period £260,000 Deferred 153.69 years at 5.00% 0.000554 £144 £11,482 £11,911 Freeholders present interest Total £11,623 £11,623 2. Marriage value calculation Landlord's proposed interest £144 Tenant's proposed interest 99 % of FHVP £260,000 £260,144 LESS Landlord's existing interest £11,623 Tenant's current interest £210,106 £221,729 £38,415 Landlord's share of marriage value @ 50.00% £19,208 £19,208 Enfranchiseent price exclusive of costs £30,830 Say £30,830