First-tier Tribunal Sets Freehold Premium at £70,875

OUTCOME: Allowed

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

HMCTS code (paper, video, audio)

Case reference : P: PAPERREMOTE

LON/00AE/OLR/22/0989

Property : 47 [ADDRESS] [POSTCODE]

Applicants : [redacted]

[COUNSEL] [NAME] : [NAME]

Respondent: [redacted]

Type of [NAME] : [NAME] for a determination under Section 21(1)a and 21(2) of the Leasehold Reform Act 1967- Missing Landlord

Tribunal members : Judge [NAME] of determination and venue : 06 April 2023 at

Heard remotely as a paper determination

Date of decision : 27 April 2023

DECISION

Description of hearing

This has been a remote video hearing on the papers which has been not objected to by the parties. The form of remote hearing was P:PAPERREMOTE, A face-to-face hearing was not held because no-one requested the same, and all issues could be determined on paper. The documents that the Tribunal were referred to are in a bundle of 257 pages, the contents of which have been noted.

Summary of the tribunal’s decision

(1) The appropriate premium payable for freehold is £70,875

Background

1. By an order dated 15 September 2022, this matter was transferred to the first-tier tribunal by Deputy District Judge Smyth, sitting at the Willesden County Court made an order.

2. The terms of the order were that

1. “Any interest of the Defendant (whether in the Premises or in the property...shall be vested in the Claimants in accordance with this order and on such terms as may be determined by the appropriate tribunal...

2. The vesting order in paragraph 1 of this order shall be effected by the execution by a district judge of a conveyance in the form approved by the appropriate Tribunal...

3. The execution of the conveyance pursuant to paragraphs 1 and 2 of this order, shall take place as soon as practicable after: (a) the determination of the appropriate tribunal of the matters specified in paragraph 4 of this order, and (b) the payment into court by the Claimants of the appropriate sum in respect of each interests to be vested...

4. To give effect to this order, the first Tribunal shall (a) determine the appropriate terms of the acquisition under paragraph 1 of this order: (b) approve a form of conveyance in accordance with paragraph 2 of this order; and (c ) determine the amount described in paragraph 3 (b) of this order.

5. This matter shall be transferred to the First Tier Tribunal in order for paragraph 4 to be carried out...

6. The Defendant shall pay the costs of this claim to be summarily assessed at the next hearing...”

3. Directions were given by the Tribunal for the determination of this matter

4. [NAME] was made on 28 November 2022, was for a determination of the premium to be paid under Section 26 of the Leasehold Reform Housing and Urban Development Act 1993 (“the Act”) in respect of a collective enfranchisment.

5. The history of this matter was fully set out in the witness statement of Mr [NAME] dated 3 January 2022, he set out a description of the premises and the details of the other qualifying tenants and the dates when the leasehold interest was purchased by each of the qualifying tenants. He also provided details of the efforts that had been made by solicitors Shegill & Co instructed on behalf of the applicants to trace the defendant which had resulted in the [NAME] to the county court. Within the bundle the Tribunal were also provided with a copy of the court order and the Office Copy entries for the premises, and the leases for flats 47a and 47b. He provided a further witness statement dated 24 August 2022, which confirmed the efforts that had been made to trace the Defendant.

6. There was a further information provided from [NAME] who had conducted a trace on behalf of the solicitors who were instructed.

7. The Tribunal were also assisted by an expert report and valuation prepared by [NAME] [NAME]. FRICS undated, from which the Tribunal determined the issues. In his report Mr [NAME] made a declaration in the terms of a surveyor acting as an expert witness that he believed in the accuracy of the matters put forward in his report and confirmed that he understood the duty to the Tribunal, and that he had complied with that duty

8. The property was not inspected by the Tribunal, this matter was determined on 6 April on the basis of the documentary evidence, which comprised a hearing bundle of 257 electronic pages.

The issues

Matters not in issue

(a) The subject property comprises a two-storey mid terrace with bay windows to both floors, brick built, rendered and partly painted to the front of the property with a pitched roof and UVPC windows. The property is converted into 2 flats, with a communal porch and separate entrances to each of the flats. [ADDRESS] is paved and has an area for storage of bins and space for 1-2 cars. - The rear garden is also paved with a brick out building, and the side access to the property is covered to form a utility area.

(b) The first floor flat comprises living room, kitchen two bedrooms and a bathroom and separate WC. The internal area is 61.79 sqm (665 Sqf).

(c) The Ground floor comprises living room, kitchen shower room study/storeroom, The tenant’s additions comprise the covered sideway alley and the outhouse in the rear garden. The gross internal areas comprise 53.17 sqm (572.11 Sqf). The flats were described as being well maintained and in good decorative order

(d) The Report provided the following information about the area.

(e) The valuation date: 24 January 2022;

(f) Unexpired term:

Grd. floor flat 64.17.5 years (lease terms 99 years from 16 June 1987)

(g) 1st floor flat. 62. 42 years (lease terms 99 years from 24 June 1985)

(h) Ground rent: The ground rent for the ground floor flat was £50.00 PA from 24.3.87 increasing to £100.00 PA after 33 years and increasing to £200.00 PA in the last 33 years of the lease. And for the first floor flat £50.00 PA from 24 June 1985 increasing to £100.00 PA after 33 years and increasing to £200.00 PA in the last 33 years of the lease.

The Evidence

9. In his report at paragraph 12.02, Mr [NAME] set out the basis of his valuation.

10. In respect of his starting point, which was the value of the existing leases, he started by considering sales of properties within the immediate and surrounding location, however due to a lack of evidence of sale properties similar to the subject property he had widened the distance of comparables from ½ mile to 1 mile. For the first floor two bed flat he used [ADDRESS] (sale date 21 April 2021) which was sold at £365,000. With a 990-year lease, and direct access to the garden, he applied a discount of 15% for the superior condition, ground floor location and access to the garden. Using these adjustments, he arrived at a figure of £317,600 which equated to £467 per square feet.

11. He also referred to [NAME], a first floor two bed flat with a long lease and direct access to the garden which was also considered to be superior to the subject flat, which was sold in September 2021, which with adjustments arrived at a valuation of £306,756 of £410 per square feet.

12. His final property was 33b [NAME] with a sale date of March 2022 which was subject to a 93-year lease to which he applied a discount of £344,000 with an equivalent square feet value of £462 per sq. ft.

13. At paragraph 16.11 he stated that unlike properties located in Central London flats in Wembley are not normally sold on square footage however he stated that nevertheless floor areas are a relevant factor in valuation. However, by using this and taking into account the factors mentioned above he stated that he was of the opinion that the long lease value of the subject flat as at 24 January 2022 of approximately £306,000.

14. In respect of the 1 Bedroom flat, His comparables were [ADDRESS], 55 A [ADDRESS], 31a and [ADDRESS], he applied a similar approach of discounting for superior condition and longer lease periods to arrive at a figure of £454 per square feet to arrive at a valuation of £270,000 as of 24 January 2022.

The Value for the Reversion

15. This produced a value for the reversion of £309,060 for flat 47A Thurby and £272,700 for 47 B Thurby.

Capitalisation Rate

16. In his valuation Mr [NAME] explained how he had used a capitalisation rate of 7%, he had used his own knowledge and experience, and had also derived assistance by applying two tribunal decisions which considered properties of similar lease terms.

Deferment rate

17. In his report he referred the Tribunal to the well-known case of [NAME] -v- [NAME] (2006) Where the Upper Tribunal concluded (upheld in the Supreme Court) that the deferment rate for flats/maisonettes should be 5%. He stated that there was no reason to depart from this rate.

[NAME]

18. Mr [NAME] stated that it had not been possible to obtain sales of evidence of similar unexpired terms for flats and maisonettes He was unable to use market evidence and therefore used both the Leasehold Reform Graphs of [NAME] together with other graphs including the Savills Analysis of [NAME] 2016 to arrive at a [NAME] of 79.91% for an unexpired lease of 62.42 years for flat 47A, and 81.06% for 64.17 years for flat 47B.

19. Mr [NAME], step by step valuation was set out in the appendix to his report.

The tribunal’s determination and Reasons for the determination

20. The tribunal considered the report prepared for the Tribunal by Mr [NAME]; however, it used its own independent judgment, The Tribunal considered that his report to be balanced and fair.

21. The Tribunal accepted the capitalisation rate and Deferment Rate, used by Mr [NAME] in his report.

22. The Tribunal has considered [NAME] and is satisfied with the terms of the draft transfer.

The premium

(2) The tribunal determines the appropriate premium to be £70,875(seventy thousand eight hundred and seventy-five pounds. With further sums deducted for costs as provided for by the order of Deputy District Judge Smyth.

(3) A copy of the valuation calculation, which has been adopted by the Tribunal is annexed to this decision.

Name: Judge Daley Date:

Appendix: Valuation setting out the tribunal’s calculations

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).

CASE REFERENCE LON/00AC/OLR/2014/0106

First-tier Tribunal

Property Chamber (Residential Property)

Valuation under Schedule 13 of the Leasehold Reform Housing and Urban Development Act 1993

Premium payable for an extended leasehold Interest in [Property]

Valuation date: [Date] 24 January 2022

APPENDIX I(2) Valuation under Schedule 6 of The Leasehold Reform Housing and Urban Development Act 1993 (as amended)

Address: 47B THURLBY ROAD, WEMBLEY, MIDDLESEX [POSTCODE] Valuati Lease Dated: 16 June 1987

Commencement Date 24 March 1987

Term: 99 years Unexpired term: 64.17 years

Ground Rent: £50, £100.00, £200 p.a at 33 yearly intervals

Capitalisation Rate: 7.00%

Deferment Rate: 5.00%

Long Lease Value(unimproved) £270,000 FHVP Value £272,700

[NAME]: 81.06% Existing Value £221,050

Diminution in the value of [NAME]'s Interest

2nd Term Ground Rent £100.00

Y.P for 29.42 years @ 7.0% £12.3339 £1,233

3rd Term Ground Rent £200.00

Y.P for 33 years @ 7.0% £12.7538

P.V £1 def. 29.42 yrs.7.0% 0.13662 £1.7424 £348

Reversion £1581

Before grant £309,060

P.V £1 def. 62.42 years @ 5.0% 0.04757 £14702 £0

After grant n/a

P.V £1 def. XX yrs @ 5.0% n/a 0

Diminution of Reversion £16,283

[NAME]'s share of Marriage Value After Extension Extended leases £306,000 [NAME]'s interest N/A £306,000

Before Extension Existing leases £246,970 [NAME]'s interest £16,283 263,253

Marriage Value 42,747 50% share attributable to

[NAME] £21,376 Premium payable Premium in respect of Flat 47A £37,659 Say £37,660

(4) Premium in respect of Flat 47B £31,215 Value of Unmodermised Land £1,000 Hope Value (Loft) £1,000 Total premium payable £70,875