First-tier Tribunal Sets Premium for Collective Enfranchisement

OUTCOME: Allowed

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BH/OCE/2024/0037 Property : 119 [ADDRESS] [POSTCODE] Applicants : [redacted] (2) [NAME] [NAME] [NAME] [COUNSEL]

and

(3) [COUNSEL] : [RESPONDENT] Respondent : [redacted] : N/A Type of [NAME] : Section 26 of the Leasehold Reform, Housing and Urban Development Act 1993 – missing landlord Tribunal members : Judge Tagliavini Mr Kevin Ridgeway MRICS Hearing : 10 [ADDRESS] [POSTCODE] Date of decision : 22 July 2025

DECISION

2 Summary of the tribunal’s decision (1) The appropriate premium payable for the collective enfranchisement is £69, 900 as per the valuations attached. (2) The tribunal approves the terms of the TR1 subject to the premium above. _________________________________________________ Background 1. This is an [NAME] made by the qualifying tenants pursuant to

section 24 of the Leasehold Reform, Housing and Urban Act 1993 (‘the

1993 Act’) for a determination of the premium to be paid for the

collective enfranchisement of [ADDRESS], London E17

6HF (‘the property’) a terraced house converted into two flats.

2. The leases for the [NAME] (first and second

applicants) and First Floor Maisonette (third applicant) at the property

are both for a term of 99 years from 15 November 1985 and 22 August

1985. . The applicants collectively wish to exercise their right to acquire

the freehold of the property in the name of [NAME] ('the

Nominee Purchaser'), at a price to be determined in accordance with

the 1993 Act.

3. The freehold interest in the Specified Premises is registered at the Land

Registry under Title Number EG1123907. The registered proprietor is

the Defendant, [RESPONDENT], whose last known address is 119 [ADDRESS] [POSTCODE].

4. A Vesting Order was made on 30 November 2023 by District Judge

Hussain sitting at the County Court at Edmonton (subsequently

amended on 28 August 2024 by [NAME] to correctly record the

first, second and third applicants) and the following Order made:

By virtue and in accordance with s27 of the act and this order

the freehold shall vest in the First Claimants on such terms as

shall be determined by the First Tier Tribunal (Property

Chamber) ("the Tribunal) to be appropriate with a view to the

interests being vested in the First Claimant in like manner (so

far as the circumstances permit) as if the claimants had, at the

date of their claim, given notice under s 13 in relation to the

specified premises.

5. The [NAME] was subsequently transferred to the tribunal and

directions given for the determination of the premium payable.

3 The hearing 1. The hearing in this matter took place on 22 July 2025 by way of a paper determination having regard to the bundle of 474 digital pages and a supplementary bundle of 36 pages both provided by the applicants. The respondent did not provide any written or other documentary evidence. The tribunal was not asked to inspect the property and the tribunal did not consider it necessary to carry out a physical inspection to make its determination.

2. The applicants relied upon the expert report and valuation of [NAME] [NAME] dated 13 March 2024 and which stated a collective enfranchisement of £66,700 is payable by the applicants.

3. In his report Mr [NAME] correctly stated the valuation date as 25 January 2023 although incorrectly stated the valuation date as 05/01/2023 in his valuation. In his report Mr [NAME] stated:

Value of Flat on its Existing Lease

To calculate the marriage value, we are required to value the

existing lease in a hypothetical, ‘No Act’ world where there are

rights to buy the Freehold. This depresses the value, [NAME] it

lower than the open-market value, which is based on the ability

to acquire the Freehold.

Obviously, there is no market evidence to support such a

hypothetical value. Therefore, valuation surveyors adopt

[NAME] to calculate the freehold value. This results in the

higher the [NAME], the smaller the gap between the existing

lease value and the extended lease value, which has a direct

correlation in reducing the amount of marriage value payable.

There are various cases currently under review via the Upper

Tribunal. This is centred on a case known as [NAME] v

[NAME].

This has promoted the best guide to assess the existing lease

value and parallel [NAME], to be based on the open market sale

value of the subject property, close to the date of valuation, with

the adjustments highlighted earlier in this report, for the benefit

of the Act.

The Gerald Eve 1996 graph of [NAME] was deemed the best

available for Prime Central London in this case, although the

Upper Tribunal commented that it was most likely this graph

overstated the correct [NAME].

4

We have noted that as a result of the [NAME] v [NAME]

case, [COMPANY] have reviewed their graph of [NAME].

[COMPANY] also produced a revised graph of [NAME] within

their published report ‘2015 Enfranchiseable Graph of

[NAME]’. It is this graph of [NAME] that we will be using for

the purpose of this valuation. This would state a relative value

for an unexpired lease term in the region of 61.62 & 61.85 years

being 79.00%.

Interest Rates

Interest Rates form part of the negotiation to calculate both the

capitalisation of the Ground Rent and the Reversionary Interest

of the lease. These are known as the ‘capitalisation rate’ and

‘deferment rate.’ The higher the interest that can be adopted, the

lower the premium will be.

A historic Land Tribunal case known as Cadogan V Sportelli

established a Freehold deferment rate of 5% for flats in Prime

Central London. The case was referred to the Court of Appeal

and the House of Lords, being subsequently upheld.

This has been subject to scrutiny relating to a Land Tribunal

decision under the case [NAME]. This focused on the

capitalisation of the rent being subject to the overall value of the

Superior Leaseholders interest once a lease had been extended.

In essence, if this superior lease continued to have a neutral or

positive value post statutory extension, then a traditional dual

rate would apply. However, if it had a negative rate, a much

lower single rate applies.

As highlighted above, The Upper Tribunal passed judgement

that the deferment rate for reversions of less than five years,

should be the net rental yield that the evidence shows to be

appropriate for the property in question. In addition, there must

be an end allowance, which in the absence of setting some other

percentage should be 5%. The tribunal’s determination 4. The tribunal determines that the premium payable is £69,900 by the applicants . Reasons for the tribunal’s determination

5 4. In reaching the figure of £69,000, the tribunal have used there expert

knowledge to value the two flats at the valuation date of 25/01/2023 as:

Ground Floor Flat: £235,000 and the First Floor Flat: £290,000. 5. The tribunal undertook a slightly more detailed valuation than that

carried out on behalf of the applicants. This included the Capitalisation

of the Ground Rent, a correction of the Valuation Date used in the

valuation by the applicants’ surveyor (although it was correctly stated

in his report),as well as revised Market Values at the valuation date, as

mentioned above.

Name: Judge Tagliavini Date: 22 July 2025

Appendix: Valuations setting out the tribunal’s calculations attached

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).

[ADDRESS], [POSTCODE]

Valuation Date 25/01/2023

Lease Commencement 15/11/1985

Lease Term 99.00 years Expiry Date 14/11/2084 Unexpired Term

61.80 years

Long Lease value

£235,000

Freehold VP value £237,350 +1% long lease value

Term 1 Term 2 Term 3

Ground rent £50.00 £100.00 £150.00

Reversion years

0.00 28.30 33.00

Capitalisation rate 5%

Deferment rate 5%

Compensation

£0.00

[NAME] 78.30%

Diminution of Landlord's interest

Ground rent £50

[NAME] 0.00 yrs @ 5.00% 0

£0

[NAME] £100

[NAME] 28.30 yrs @ 5.00% 14.97324088

PV of £1 0.00 yrs @ 5.00% 1

£1,497

[NAME] £150

[NAME] 33.00 yrs @ 5.00% 16.00254921

PV of £1 28.30 yrs @ 5.00% 0.251337956

£603

Reversion to VP value £237,350

PV 61.80 yrs @ 5.00% 0.04903445

£11,638

Value existing freehold

£13,739

[NAME]'s interest on reversion of new lease

FH VP

£237,350

PV 151.80 yrs @ 5.00% 0.00060739

-£144

£13,595

Landlord's share of Marriage Value

Val. Tenant's interest new long lease £235,000

Val. [NAME]'s interest after reversion of new lease

£144

£235,144

Less

Val. tenant's interest existing lease [NAME] 78.30% £185,845

Val. [NAME]'s interest existing lease £13,739

£199,584

£35,560

Marriage Value at 50% £17,780

Compensation £0

PREMIUM £31,375

Say

£31,400

[ADDRESS], [POSTCODE]

Valuation Date 25/01/2023

Lease Commencement 22/08/1985

Lease Term 99.00 years Expiry Date 21/08/2084 Unexpired Term

61.57 years

Long Lease value

£290,000

Freehold VP value £292,900 +1% long lease value

Term 1 Term 2 Term 3

Ground rent £50.00 £100.00 £150.00

Reversion years

0.00 28.21 33.00

Capitalisation rate 5%

Deferment rate 5%

Compensation

£0.00

[NAME] 78.30%

Diminution of Landlord's interest

Ground rent £50

[NAME] 0.00 yrs @ 5.00% 0

£0

[NAME] £100

[NAME] 28.21 yrs @ 5.00% 14.95087293

PV of £1 0.00 yrs @ 5.00% 1

£1,495

[NAME] £150

[NAME] 33.00 yrs @ 5.00% 16.00254921

PV of £1 28.21 yrs @ 5.00% 0.252456354

£606

Reversion to VP value £292,900

PV 61.57 yrs @ 5.00% 0.04958780

£14,524

Value existing freehold

£16,625

[NAME]'s interest on reversion of new lease

FH VP

£292,900

PV 151.57 yrs @ 5.00% 0.00061424

-£180

£16,445

Landlord's share of Marriage Value

Val. Tenant's interest new long lease £290,000

Val. [NAME]'s interest after reversion of new lease

£180

£290,180

Less

Val. tenant's interest existing lease [NAME] 78.30% £229,341

Val. [NAME]'s interest existing lease £16,625

£245,966

£44,214

Marriage Value at 50% £22,107

Compensation £0

PREMIUM £38,552

Say

£38,500