First-tier Tribunal Sets Freehold Premium Under Leasehold Reform Act

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference : LON/00BA/OCE/2019/0171 Property : 26 [ADDRESS] [POSTCODE] Applicant: [redacted]

[COMPANY] :

[COMPANY] & Mr. [COUNSEL], IRRV, [NAME]

Respondents : [redacted] : Mr. [COUNSEL] of Application : Enfranchisement – section 42 Tribunal Members : Judge Tagliavini Miss M Krisko FRICS

Date and venue of hearing

: 17 [ADDRESS] [POSTCODE]

Date of Decision

: 9 January 2020

DECISION

2

Decisions of the tribunal

I The tribunal determines that the premium payable for the acquisition of the freehold of the subject property and appurtenant property at 26 [ADDRESS] [POSTCODE] is £18,700. _________________________________________________

The application

1. This is an application made under the provision of section 42 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”) seeking to acquire the freehold of the subject property.

Background

2. By an Initial Notice served under section 13 of the 1993 Act dated 2 May 2019. A Ms [NAME] of [ADDRESS] and Mr. [APPELLANT] and Ms [APPELLANT] of [ADDRESS], the applicant and nominee purchaser sought to acquire the freehold of the subject property, gardens and other land appurtenant to [ADDRESS] for a proposed premium of £13,500 and £100 respectively.

3. By a Counter Notice served under section 21 of the 1993 Act dated 25 June 2019, the [NAME] admitted the applicant’s right to acquire the freehold but asserted that the premium payable is £37,800 and £200 for the freehold and appurtenant property respectively.

4. Directions were given by the tribunal dated __ in order to progress this application to a final hearing. Subsequently, the parties agreed in their signed Statement of Agreed Facts dated 6 and 9 December 2019 the following matters:

(i) The size of the accommodation – 530sqft/49.2m2 (GIA) - GFF and 590 sqft/54.8m2 (GIA) - FFF

(ii) The 117 years remaining on the lease of the ground floor flat

(iii) The 81 years remaining on the lease of the first floor flat

(iv) The valuation date of 2 May 2019

(v) The capitalisation rate at 6%

(vi) The deferment rate at 5%

(vii) Price for freehold and side extension and loft - £18,700.

5. Therefore, the only issue remaining between the parties was the compensation payable for change of the lease plan of the FFF changing it form a one bedroom to a two bedroom flat by the repositioning of the kitchen into the living room area with access to a loft area above.

3 The premises

6. The premises comprise two flats on the ground and first floors of a converted terraced house. The ground floor flat is subject to a lease dated 25 August 2017 made between [COMPANY] and [NAME] [NAME] for a term of 217 years from 8 June 1973. The first floor flat is subject to a lease date 8 May 2001 made between [COMPANY] and [NAME] [NAME] [NAME] granted from 25 March 1973 to 11 May 2100.The ground floor flat is a one bedroom flat with a small rear garden and the first floor flat was a one bedroom flat with a kitchen to the rear which has been repositioned into the living room area to create a two bedroom flat.

The Applicant’s evidence

7. As the parties were unable to reach agreement on the one outstanding issue a hearing was held at which the applicant nominee purchaser was represented by Mr. [APPELLANT] and the [NAME] by Mr. [RESPONDENT] (valuer). The latter provided the tribunal with his expert report dated 16 December 2019. The applicant did not provide the tribunal with any documentation or report on which it relied. Therefore, Mr. [NAME] was unable to provide any substantive evidence in support of the applicant’s case other than to submit that in his view there was no ‘uplift’ to the value of the flat for which the respondent should be compensated.

The Respondent’s evidence

8. In his oral submissions to the tribunal Mr. [NAME] submitted that the lessee needed permission under the terms of the lease and as the lease plan specifically identified each room in the flat, to remove the kitchen fittings and to reposition it in the living area, thereby converting the flat from a one bedroom to a two bedroom flat. Mr. [NAME] submitted that there had been an uplift in value because of this work although was unable to say when this work had been carried out or by whom.

9. Mr. [NAME] asserted that a two bedroom flat was worth in the region of £60K more than a one bedroom flat in the same area and referred the tribunal to the comparable properties relied upon in his report. Mr. [NAME] state in his report that existing value of the FFF as a one bedroom is ££72090 and £435977 as a two bedroom flat thereby increasing its value by £63,887. Allowing for the cost of the works of re-siting the kitchen in the amount of £25,200 this provided a development value of £38,687; [NAME] v [NAME] and Peggy High Foundation [2013] UKUT 0646 (LC).

The tribunal’s decisions and reasons

10. The tribunal finds that having agreed the GIA of the two flats and their values it is not now open for Mr. [NAME] to argue that there should be an added development value in respect of the repositioning of the kitchen.

4 The tribunal finds and it was accepted by Mr. [NAME] that there had been no structural work carried out in moving the kitchen from the rear of the flat to the front and therefore, it was agreed that it was not a structural alteration and one that did not entail the removal of the landlord’s fittings. Further, the tribunal finds that the installation of the kitchen has added value in the same way as an other tenant’s improvement would have done. The tribunal does not accept Mr. [NAME] argument that the repositioning of the kitchen in the living room area has generated the increase in value for which he contends. Had Mr. [NAME] sought to properly assert that there had been an increase in value the tribunal would have expected this to have been noted by an agreement as to the value per square foot.

11. The tribunal finds the tenant has not altered or enlarged the flat but simply changed around the current use of the rooms. This could be changed back or the living room used as a bedroom or the rear room used as a living room. How the tenant currently chooses to use his accommodation should not be reflected in the reversion value.

12. Therefore, the tribunal finds that the price payable for the freehold and appurtenant property is £18,700 as agreed by the parties. The tribunal was also informed that the respondent’s costs payable by the applicant had been agreed by the parties in the sum of £5,160 including VAT and fees.

Signed: Judge Tagliavini

Dated: 9 January 2020