First-tier Tribunal Sets Premium for Lease Extension Under 1993 Act

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : AB/LON/00AJ/0LR/2019/0461 Property : 83b [ADDRESS] [POSTCODE] Applicants :

[redacted] : [NAME] (Solicitors) Respondent : [redacted] : Not applicable (missing landlord) Type of application : Application under Sections 50 and 51 of the Leasehold Reform Housing and Urban Development Act 1993 Tribunal members : [NAME] [NAME] : 10 [ADDRESS] [POSTCODE] Date of paper determination : 12 June 2019

DECISION

2 Decisions of the Tribunal (1) The Tribunal determines that the price to be paid by the applicant for the lease extension is £35,100. (2) The terms of the draft lease are provided for in paragraph 12 below. The Background 1. This is an application under Section 50 of the Leasehold Reform Housing and Urban Development Act 1993 (“the 1993 Act”) pursuant to an order issued at the County Court at Brentford on 12 March 2019.

2. Section 50 of the 1993 Act concerns claims for lease extension where the relevant landlord cannot be found. It enables the court to make a vesting order in respect of any interests of the landlord which are liable to acquisition.

3. Under Section 51 of the Act, the role of the Tribunal is to determine the appropriate sum to be paid into Court in respect of the landlord’s interests and also to approve the form and terms of the proposed new lease.

4. The applicant in this matter is Mr [APPELLANT]. He is the qualifying tenant of the first floor maisonette flat, namely Flat b 89 [ADDRESS] [POSTCODE] (“the Property”). The respondent freehold owner is a Mr [APPELLANT].

5. On 26 April 2018 the applicant issued a Part 8 Claim at the County Court at Brentford for a vesting order under Section 50(1) of the 1993 Act seeking to extend the lease under the terms of the Act. The applicant has been unable to ascertain the whereabouts of the respondent and was therefore unable to serve a notice on him pursuant to Section 13 of the 1993 Act.

6. The applicant has provided the Tribunal with a valuation report prepared by Mr [NAME] BA (Hons), PGDip Surv, MRICS dated 4 June 2019.

7. Mr [NAME] is of the view that the premium to be paid for the leasehold extension is £24,523.

8. No sales transaction evidence is provided in the submitted valuation report for current lease value to support the opinion of Mr [NAME] of the premium payable. The Tribunal has relied upon their knowledge and experience of the property market in the Ealing area in making this

3 determination. They have also had regard for recent and relevant Upper Tribunal decisions. The Determination 9. The Tribunal accepts the opinions expressed by Mr [NAME] in his valuation report dated 4 June 2019 save that: (i) No market evidence on current lease value is submitted in this case. The Expert relies upon data from a review of the RICS Research Report dated October 2009 on relativity. The reliability of the RICS relativity graphs is criticised in the decision [NAME] v [NAME] UKUT 0233 (LC) and in Mr [NAME] and others v [COMPANY] UKUT 468. (ii) The Expert includes in his submission reference to a number of First-tier Tribunal decisions to support his reliance upon the RICS relativity graphs. This Tribunal is not content to rely solely upon these First-tier Tribunal determinations and places greater weight on the guidance given by the Upper Tribunal on relativity. The authorities given most weight in this decision are: - [COMPANY] ([COMPANY]) [2017] UKUT 494 (LC), is a decision involving [ADDRESS], Chelmsford. The UT assessed a relativity of just under 82% for an unexpired term of 66.8 years. The Upper Tribunal relied upon the Savills 2016 graph as the source of this relativity; and - [NAME] v Ironhawk Ltd [2018] UKUT 311 (LC), a decision involving [ADDRESS] N17 (Tottenham). The UT assessed a relativity rate of 86.9% for an unexpired term of 75.23 years. They concluded that there was no reliable local evidence, and again chose to rely on the 2015 Savills’ enfranchiseable graph. (iii) In determining relativity, the Tribunal must focus on the state of the market in Ealing at the valuation date. In the absence of any evidence of local transactions, we must consider what relativity graph was used by the local market at the time or which

4 graph best reflects the operation of that local market. (iv) In our experience as an expert Tribunal, the local market in Ealing is different from Prime Central London. This reflects a range of factors. The market is less well informed. There is a greater demand for shorter leases. (v) It is also our opinion the market reflects recent Tribunal guidance on the calculation of lease extension premiums. (vi) We therefore take an average of the relativities for an unexpired term of 66.67 years from the GE 2016 and Savills 2016 graphs. This produces a figure of 82.6% as our starting point but adds 2% to reflect the local market conditions in Ealing. (vii) The relativity adopted by the Tribunal is 84.6% for the current lease at the property.

10. The adjusted calculation has resulted in premium of £35,100. A copy of the Tribunal’s valuation is attached to this decision.

11.

Accordingly, the Tribunal determines that the premium to be paid in respect of the leasehold extension of Flat b 89 [ADDRESS] [POSTCODE] is £35,100.

12. The Tribunal also approves the draft proposed lease included in the bundle at (7), pages 58-66 which has been submitted by the applicant, subject to the inclusion at paragraph LR7 Premium and section 5 that the consideration (the premium of £35,100) has been paid into court.

13. This matter should now be returned to the County Court sitting at Brentford under Claim Number EOOOBF 633 in order for the final procedures to take place. [NAME] [NAME] 12 June 2019

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