First-tier Tribunal Sets Lease Extension Premium

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BK/OLR/2025/0774 Applicants : [redacted] (2) [NAME] [NAME] :

[ADDRESS], [POSTCODE]

Representative : [NAME] [COUNSEL], Solicitor from [RESPONDENT] Respondent : [redacted] : Mrs [COUNSEL] of Counsel Type of [NAME] : Section 48 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal members : Tribunal Judge I [NAME] (Hons) [NAME] of hearing : 18 November 2025 Date of decision : 6 January 2025 Amended 20 January 2026

DECISION

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Background 1. This is an [NAME] made by the Applicant leaseholders pursuant to section 48 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) for a determination of the premium to be paid for the grant of a new lease of [ADDRESS], [POSTCODE] (the “property”). 2. The property is described as being a first-floor purpose built flat set in a

seven storey Grade II listed building constructed in about 1935 and

containing about one hundred and thirty three self-contained flats. The

building is of a traditional form of construction with solid brick walls, a

suspended concrete floor and set beneath an unseen flat roof. Windows

are of the original single-glazed metal framed casement units. Access

to the property is via a shared front drive and path leading into a

communal portered entrance hall via a front door with a door entry

security system installed. A staircase rises to the first-floor landing

where the property's front door is located. A lift service is provided.

3. By a notice of claim dated 22 July 2024 (“the notice”), served pursuant

to section 42 of the Act, the Applicants exercised the right for the grant

of a new lease in respect of the property. The notice proposed a

premium of £73,250. 4. At the time, the Applicant held the existing underlease for a term of 99

years with effect from 25 December 1974. The unexpired lease term, as

the date of valuation is 49.42 years. The current ground rent is £100per

annum and increasing to £150 per annum on 25 December 2040.

5. On 17 March 2022, the Respondent, as the competent landlord, served a

counter-notice admitting the validity of the claim and counter-proposed

a premium of £168,900 for the grant of a new lease. The freeholder is

[COMPANY]. 6. The parties were unable to agree the premium payable and the Applicant

made an [NAME] for a determination of those terms by an [NAME]

dated 24 February 2025. 7. The Applicant’s valuer is [NAME] [APPELLANT] [NAME] whose report is

dated 5 November 2025. The Respondent’s valuer is [NAME] [RESPONDENT] [NAME] whose report is dated 28 October 2025. Both valuers prepared

a Statement of Agreed Facts and Disputed Issues dated 27 October 2025. The issues

3 Matters agreed & Not Agreed 8. The parties have agreed the terms of the new lease. However, the

premium remains in dispute. The specific valuation elements not

agreed were the freehold vacant possession value, the claimed

improvements (replacement kitchen and bathroom fittings and the

relativity/existing lease value. These are each dealt with in turn below.

The hearing 9. The remote video hearing in this matter took place on 18 November 2025. The Applicant was represented by [NAME] [COUNSEL] a Solicitor. The Respondent by Mrs [COUNSEL] of Counsel. Freehold Vacant Possession Value The Comparables 10. [NAME] [NAME] provided a schedule showing six properties used in comparable evidence two of these are used by [NAME] [NAME] in his expert report. The Tribunal prefers the two used by both surveyors namely, [ADDRESS] and [ADDRESS].

11. Numbers 72, 24 and [ADDRESS] completed in May 2021, September

2021 and April 2022 respectively. This proposed evidence is considered

historic and is susceptible to significant indexation and therefore heavily

adjusted market evidence. In addition, it is evident to the Tribunal that

there was an important shift in market values. [ADDRESS] sold in April

2022 for £510,000, [ADDRESS] sold March 2023 for £630,000 for

what is essentially the same flat.

12. The remaining comparable, [ADDRESS], exchanged and completed

in November 2025 for £500,000. This future sale is well past the

valuation date of 23 July 2024, and the hypothetical purchaser would

not have been aware of it in what has been considered a falling market

since the valuation date.

13. The Tribunal discounted the private sale of 3 flats in the block during

2023, however, the values confirm the valuation tone in the block.

14. It is for these reasons the Tribunal adopt the 135 and [ADDRESS] as

comparable evidence.

The Two Comparables

15. Both experts made adjustments to the comparable evidence reflecting

floor level, floor area and condition. Overall, the Tribunal preferred [NAME]

[NAME] breakdown of adjustments which were considered more

appropriate. [NAME] [NAME] has made excessive adjustment to floor

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location- 5%, less for improvements at £2000 per square metre =

£86,200 (see below)

The Time Adjustment Method

16. In order to adjust the date of completion for the comparable evidence

compared to the valuation date of the 23 July 2024, [NAME] [NAME] used the

Savills index for prime central London which is based upon a mixture of

transactional evidence. [NAME] [NAME] did not make any adjustment for

whatsoever as he states in his report page 130, the market is driven by

the yields associated with the buy to let market, being the vast majority

of buyers. This is flawed methodology as the traditional method of

valuation will always make such an adjustment. Therefore, the Tribunal

agrees with [NAME] [NAME].

Calculation of Freehold Value

17. [ADDRESS] (sixth floor) sold on 06 March 2023 for £630,000 (£1358

psf @ 464f2) index value: £620,073 less 3% for 6th floor, outlook £18,602

= £601,147 = £1296 fsf x 453f2 (floor of subject) = £587,088.

18. [ADDRESS] (4th floor) sold on 09 June 2023 for £625,000 (£1214 psf

@ 515f2). This floor area is preferred to [NAME] [NAME] as it was measured

by [NAME] [NAME] and not relied on agents details) index value: £618,283 less

3% outlook and double aspect (this takes into account galley kitchen) =

£18,548 = £599,735 = £1,165 psf x 453f2 = £527,745

19. The average of the two comparables provides a figure of £557,417 for

the long lease value and a freehold value of £563,047, but say

£563,000 before consideration of tenants’ improvements.

Claimed Improvements

20. [NAME] [NAME] claimed that the replacement kitchen and bathroom fittings

have resulted in an improvement in value of around £86,000 based on

his calculations page at 120-121 in the bundle. In the Tribunal’s opinion,

the photographs in the bundle show the fittings to be a reasonable

standard at best, and the evidence indicates their installation was

carried out before 2011 and possibly before 2006 when the Applicants

acquired the property. For these reasons, the dated replacements are

considered no more than a repair or renewal as required by the lease

covenant. In conclusion, there is no evidence that the current fittings

increase the value of the flat.

Relativity

21. [NAME] [NAME] used evidence of four short leasehold transactions in the

block. [NAME] [NAME] considered three of these to be too dated and when he

analysed [ADDRESS] this calculates a relativity of 83.06% compared

to the average of the two graphs’ ([NAME] and [NAME]) Therefore, he

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took the average of the two graphs. This is, of course, now considered

standard methodology where there is no suitable market evidence.

22. Again, the Tribunal agrees with [NAME] [NAME] and considers three of the

transactions put forward by [NAME] [NAME] are too dated and provide an

unacceptable margin of tolerance. Where the Tribunal departs from [NAME]

[NAME] is to include [ADDRESS] which completed in May 2023 with an

unexpired term of 50.5 years.

23. In the First Tier Tribunal case for [ADDRESS]

(LON/00BK/OLR/2021/0005) the relativity was determined at 82.95%

for a unexpired lease term of 53.65 compared to the Savills graph of

73.7%.

24. Therefore, the Tribunal preferred a blended approach in the calculation

of the existing lease value. The Tribunal accepted [NAME] [NAME] calculations

for [ADDRESS] at 83.06% and 70.23% based on the graphs.

The Relativity Calculation

25. The Tribunal took an average of the two figures at 76.65%.

26. Therefore, the Tribunal adopts a freehold value of £563,000 and a

short lease value of £433,510 (77% relativity)

29. Accordingly, the Tribunal determines the appropriate premium for the lease extension to be £87,815. A copy of its valuation calculation is annexed to this decision.

Name:

Tribunal Judge I Mohabir

Date:

6 January 2026 Amended 20 January 2026

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.

6 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).