First-tier Tribunal Sets Lease Extension Premium at £72,300

OUTCOME: Allowed

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AH/OLR/2021/0710 HMCTS code (paper, video, audio)

V:VIDEOREMOTE Property : 33 [ADDRESS] [POSTCODE] Applicant: [redacted] : Mr [COUNSEL] Respondent : [redacted] : Mr [COUNSEL] of application : Lease extension – section 48(1) of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal member(s) : Judge [NAME] of hearing : 10 [ADDRESS] [POSTCODE] 8 March 2022 Date of decision : 16 March 2022

DECISION

Covid-19 pandemic: description of hearing This has been a remote hearing on the papers which has not been objected to by the parties. The form of remote hearing was V: VIDEOREMOTE. A face-to- face hearing was not held because all issues could be determined in a remote VIDEO Hearing and a face-to-face hearing was not requested by the parties. The documents that the Tribunal were referred to are in a bundle of 212 pages, the contents of which have been considered.

2 The tribunal’s summary decision (1) The premium payable for the grant of a new lease of 33 [ADDRESS] [POSTCODE] is £72,300. _________________________________________________ The application 1. This is an application made section 48(1) of the Leasehold Reform,

Housing and Urban Development Act 1993 seeking the tribunal’s

determination of the premium to be paid for the grant of a new lease of

33 [ADDRESS] [POSTCODE] (‘the flat’) a

two-bedroom second floor flat built circa 1960’s. Background 2. The applicants are the long lessee of the premises under a leased dated

30 June 1961 made between [COMPANY] and [NAME] [NAME] and [NAME] for a term of 99

years with effect from 29 September 1960. In a Notice of Claim

dated 18 March 2021 the applicants sought the grant of a new lease for a

premium payable of £57,000. In a Counter Notice dated 12 May 2021

the respondent admitted the applicants’ right to the grant of a new

lease but asserted that the premium payable is £100,000. 3. Subsequently, the parties’ valuers, Mr [NAME] for the applicants

and Mr [RESPONDENT] for the respondent agreed the following issues:

(i) The date of valuation is 18 March 2021.

(ii) There were 38.53 years unexpired at the date of valuation.

(iii) The deferment rate is 5% for the freehold reversion.

(iv) The GIA of the flat is 70sqm (753 sqft).

(v) The capitalisation rate for the ground rent is 7%.

(vi) The value of the flat with an extended lease is 98.1% of the

freehold value.

(vii) The value of the flat with the current lease is 60.7% of the freehold

value.

3 4. Therefore, the only remaining issue to be determined by the tribunal is

the premium payable. The applicants’ case 5. Mr [COUNSEL] represented the applicants both as their

advocate and their valuation expert witness. In his oral evidence to the

tribunal, Mr [NAME] spoke to his valuation report dated 15 February

2022, in which he contended for a premium of £72,299 (rounded to

£72,3000 to be paid by the applicants. In support of his contentions,

Mr [NAME] relied upon a number of sales of comparable properties within

250m of the flat within a few months of the date of valuation. 6. It was agreed that the kitchen and bathroom were in a basic condition.

Mr [NAME] contended that the installation of double glazing should be

disregarded as a tenants’ improvement and that there was no right to

use the rear communal area. However, Mr [NAME] was unable to provide

any details as to when the double glazing was installed, who installed it

or at what cost. He contended that about £4,000 should be disallowed

in respect of the double glazing although appeared not to reflect this in

his valuation. 7. Mr [NAME] placed particular reliance upon the sales of 3 and [ADDRESS] as being close to the subject flat, although in the SE25 postcode

and which sold for £270,000 in October 2020 and £271,000 in May 2021

with around 140 years remaining on their leases. Mr [NAME] made no

adjustments on these sales prices even though [ADDRESS] is a

ground floor flat with doors opening onto a front garden and [ADDRESS] comprising a first floor flat. 8. After the conclusion of the hearing Mr [NAME], with the agreement of the

tribunal and Mr [NAME] provided documentary evidence of service

charges payable for the flat in the period 24/06/2021 to 23/06/2021

having contended there were two sperate service charges demanded in

respect of (i) block costs and (ii) estate costs. This was in contrast to Mr

[NAME] assertion that there was only one annual service charge levied of

around £1,500. The respondent’s case 9. The respondent relied upon the evidence of Mr [COUNSEL] who also

acted as an advocate and valuation expert witness. Mr [COUNSEL] spoke to

his report dated 15 February 2022 and in which he calculated the

premium payable as £88,681. 10. Mr [NAME] relied upon sales of a number of fats which he asserted were

comparable to the subject flat. These also included 3 and [ADDRESS] with the remaining 7 sales having taken place on properties locate

4

in the SE19 postcode. Mr [NAME] emphasised that the best comparable

sales of properties should be of those located in the same postcode as the

subject flat. 11. Mr [NAME] made a number of adjustments in respect of the other 7 sales

to reflect their differences with the subject flat. These included the

demise of a garden, their superior condition, and larger sizes. Mr [NAME]

told the tribunal in his evidence that he had tried to ‘stand back’ to ensure

the adjustments he made to these comparable sales and the prices paid

appeared reasonable. Mr [APPELLANT] did not accept there were any tenant’s

improvements to be disregarded at the subject flat and contended the

lessees had shared use of the rear communal area. The tribunal’s decision and reasons 12. The tribunal determines the premium payable for the grant of a new

lease is £72,300. 13. The tribunal preferred the evidence of Mr [NAME] to that of Mr [NAME]. The

tribunal found the evidence of Mr [NAME] on the adjustments he had

made, in respect of his 7 alternative comparable sales to be inconsistent

and unreliable. In contrast, the tribunal preferred the evidence relied

upon primarily of Mr [NAME] of the sales of Flats 3 and [ADDRESS]

as being the similar to the subject premises. As these sales took place in

in October 2020 and May 2021 respectively, they straddled the valuation

date sufficiently closely to provide good evidence of the premium to be

paid for the subject flat. 14. The tribunal however finds that the annual service charges in the year

comprised of a single demand as part of the evidence provided by Mr

[NAME] related to premises described as [ADDRESS] [POSTCODE] which did not form part of this application. 15. The tribunal is not satisfied that the double glazing is a tenant’s

improvement. The tribunal finds that Mr [APPELLANT] in his report conceded

the applicants have the use of the communal rear garden although he

did not openly repeat this concession at the hearing. In any event the

tribunal notes that under the terms of the lease the lessees are required

to contribute to the maintenance of the rear garden as well as other

communal areas. 16. In conclusion the tribunal determines the premium payable is £72,300

as set out in the valuation of Mr. [NAME] in his report dated 15 February

2020 and in the tribunal’s valuation attached.

5 Name: Judge Tagliavini

Date: 16 March 2022

ANNEX - RIGHTS OF APPEAL

Appealing against the tribunal’s decisions

1. A written application for permission must be made to the First-tier Tribunal at the Regional tribunal office which has been dealing with the case.

2. The application for permission to appeal must arrive at the Regional tribunal office within 28 days after the date this decision is sent to the parties.

3. If the application is not made within the 28-day time limit, such application 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 application for permission to appeal to proceed despite not being within the time limit.

4. The application for permission to appeal must state the grounds of appeal and state the result the party making the application is seeking. All applications for permission to appeal will be considered on the papers

5. Any application to stay the effect of the decision must be made at the same time as the application for permission to appeal.

6 Tribunal’s valuation for lease extension

[ADDRESS], [POSTCODE]

Valuation Date 18/03/202 1

Lease Commencement 29/09/196 0

Lease Term 99.00 years Expiry Date 28/09/205 9 Unexpired Term 38.53 years

Long Lease value £270,000 +98.1% F/H VP value

Freehold VP value £275,229

Ground rent £12.60

Reversion years

38.53

Capitalisation rate 7%

Deferment rate 5%

Compensation

£0.00

Relativity 60.70%

Diminution of Landlord's interest

Ground rent £13

YP 38.53 yrs @ 7.00% 13.231946 29

Reversion to VP value £275,229

PV 38.53 yrs @ 5.00% 0.1526076 5

£42,002

Value existing freehold

£42,169

L/lord's interest on reversion of new lease

FH VP

£275,229

PV 128.5 3 yrs @ 5.00% 0.0018903 4

-£520

£41,648

7

Landlord's share of Marriage Value Val. Tenant's interest new long lease £270,00

Val. l/lord's interest after reversion of new lease £520

£270,52

Less

Val. tenant's interest existing lease Relativity 60.70% £167,064

Val. l/lord's interest existing lease £42,169

£209,23 3

£61,287

Marriage Value at 50% £30,644

PREMIUM £72,292

Say

£72,300