First-tier Tribunal Sets Lease Extension Premiums

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) SITTING AT 10 ALFRED PLACE, [POSTCODE]

Case references

: LON/00BH/OLR/2020/1057

HMCTS code : V: CVPREMOTE Properties :

Flats 5,6,7,8,13,14 and 15 [ADDRESS] [POSTCODE]

Applicants : [redacted] [NAME], [RESPONDENT] & [NAME]

Respondent: [redacted]

[NAME]

[COMPANY] : Mr [COUNSEL] of [NAME] :

Lease extensions

Tribunal members :

Judge [NAME] of hearing. :

6 July 2021

Date of decision

:

2 August 2021

DECISION

2 Covid-19 pandemic: description of hearing This has been a remote paper hearing which has been consented to by the parties. The form of remote hearing was V: VIDEOREMOTE. A face-to-face hearing was not held because it was not practicable, and all issues could be determined in a remote hearing. The documents that the tribunal was referred are contained in the applicants (electronic) bundle 1 t0 509. ____________________________________________________ The tribunal’s summary decision (1) The tribunal determines that the premiums payable for flats 5, 7 and 8 is £34,020. (2) The tribunal determines that the premium payable for flats 6, 13, 14 and 15 is £28,880. _________________________________________________________ The [NAME]

1. This is an [NAME] seeking a determination by the tribunal of the terms and premium payable for a lease extension in respect of the subject premises. The premises 2. The subject premises comprise purpose built located on various floor of a 3- storey apartment block set on an estate of similar blocks. Flats 6, 13, 14 and 15 comprise one-bedroom flats. Flats 5, 7 and 8 comprise two-bedroom flats.

3. The parties agreed the following issues: (i) A valuation date of 24 January 2020. (ii) That the lease terms for all properties being 99 years from 15 August 1985. (iii) The unexpired term for all properties is 65.56 years. (iv) The Ground Rent for flats 5, 7 & 8 amounts to £70 per annum rising to £150 and £225 for the last 33 years period. The Ground Rent for flats 6, 13, 14 & 15 amounts to £70 per annum rising to £140 per annum and £210 for the last 33 years period.

3 (v) The deferment rent is 5%. (vi) The capitalisation rate is 6%. (vii) The long leasehold value of flats 5, 7 & 8 is £307,500. (viii) The long leasehold value of flats 6, 13, 14 & 15 is £260,000. (ix) The terms of the new lease(s). The issues remaining 4. The issues that the tribunal is required to determine for the subject flats are (i) relativity (ii) the short lease value of the subject flats and (iii) the premium(s) payable. The applicants’ case 5. The applicants relied upon a valuation report prepared by Mr [NAME] of [COMPANY] dated 15 June 2021, which appeared on pp 7-324 of the hearing bundle. Mr [COUNSEL] also represented the applicants, both as an advocate with the purpose of putting the applicant’s best case to the tribunal and as an independent valuation expert. In the absence of any declarations as to any potential conflicts of interest and on questioning by the tribunal, Mr [NAME] admitted the following: (i) He is the son of applicants [NAME] and [APPELLANT]. (ii) He is the nephew and employee of the applicant [APPELLANT]. (iii) He is the Secretary of the applicant company [APPELLANT]. (iv) [NAME] is a client of [COMPANY].

6. Despite this apparent lack of independence and objectivity, Mr [NAME] told the tribunal that he accepted that his duty lay first and foremost to the tribunal. Mr [NAME] told the tribunal, that most of the flats in [ADDRESS], are owned by buy-to-let investors and that the subject flats are all owned by buy-to-let investors.

7. In his report Mr [NAME] relied upon several market sales of similar properties in and around the local area of which the average sale price adjusted by LHHPI and the extra value of improvements to produce an unimproved value to the subject flats of £217,073 and takes this as the long lease value of the subject flats.

4 8. Mr [NAME] used his experience of sales in the area and referred the tribunal to the guidance provided by the Upper Tribunal in The Sloane Stanley Estate v Mundy [2016] UKUT 0223 (LC) to derive an opinion of relativity of 88.67% later revised in the hearing to 85.32% 9. Therefore, Mr [NAME] arrived at premiums payable for flats 6,13,14 and 5 of £20,100 and premiums payable for flats 5,7 and 8 of £23,625. The respondent’s case 10. The respondent relied upon the expert valuation report dated 15 June 2021 and the oral evidence of Mr [NAME] of [COMPANY] which appeared on pp 326-509 of the hearing bundle.

11. Mr [NAME] spoke to his report in his oral evidence and told the tribunal that he looked at the market evidence although there was no transaction at around the valuation date involving the subject leases and had therefore looked at other flat sales in the ‘real world’ on similar nearby estates. Mr [NAME] stated he had found these unhelpful as they had occurred several years before the valuation date and had therefore relied on the published relativity graphs and Upper Tribunal decisions including [NAME] v Treskonova [2020] UKUT 0164 (LC).

12. Using the [NAME] graph and [NAME] graph these provided an average figure for relativity of 81.965%. This provided premiums of £34,020 for flats 5, 7 and 8 and a premium of £28,880 for flats 6, 13, 14 and 15. The tribunal’s decision and reasons 13. In In light of Mr [NAME] failure to voluntarily disclose his relationship with the applicants and his apparent conflict of interest, the tribunal considered that the evidence Mr [NAME] provided, was not sufficiently objective, as he had a personal interest in achieving the lowest payable premiums and lacked credibility. Consequently, the tribunal preferred the evidence of Mr [NAME] and accepted that he had adopted an approach to the valuation in line with previous Upper Tribunal decisions and guidance.

14. Therefore, the tribunal determines that the premiums payable for flats 5, 7 and 8 is £34,020 and the premium payable for flats 6, 13, 14 and 15 is £28,880.

Name: Judge Tagliavini

Date: 2 August 2021

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Rights of appeal from the decision of the tribunal 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).