First-tier Tribunal Sets Premium for Lease Extension Under Leasehold Reform Act

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : MM/LON/00BH/OLR/2022/0183 HMCTS code (paper, Video, audio)

Property : :

P:[ADDRESS] [POSTCODE]

Applicant : [redacted] Mrs [COUNSEL] [NAME] : [COUNSEL] LLP Respondents : [redacted] : [NAME] of Application :

Sections 26 and 27 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal Member :

[NAME] (Hons) LLM Property Law MA FRICS

Date of determination and venue: 16th August 2022

Date of Decision: 23rd August 2022

DECISION

This has been a remote paper determination, which has been consented to by the parties. A face-to-face hearing was not held because it was not practicable and no one requested same.

The documents the Tribunal were referred to were in a bundle of some 196 pages.

Summary of the tribunal’s decision

(1) The appropriate premium payable for the collective enfranchisement is £45,586. (Forty-five thousand five hundred and eighty-six pounds). Background 1. This is an application made by the applicant qualifying tenants pursuant to section 26 and 27 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) for a determination of the premium to be paid for the lease extension of [ADDRESS] [POSTCODE]. (the “property”) where the Landlord cannot be found.

2. On 7th June 2022 District Judge Trigg sitting at County Court at Guilford, sitting at Stains Upon Thames law courts, ordered that the claim is transferred to the First Tier Tribunal for administration. The issues 3. In the absence of the Landlord there are no matters agreed. The applicants have submitted a valuation report prepared by [NAME] (Hons) [NAME], dealing with the following matters: (a) The subject property is a semidetached period conversion construction over ground and first floor built circa 1890. The property is of traditional solid brick construction, with decorated rough render to the front elevation. The roof is hipped and pitched and covered in concrete tiles. The subject flat, is a split-level property, over first and part second floor, with stairs leading from the ground floor. The current accommodation comprises landing, reception room, kitchen, 3 bedrooms, cloakroom (WC) and bathroom (no WC). The third bedroom is a box room.

(b) The valuation date is 1st September 2021, being the date of the application to the court. (c) Details of the tenants’ leasehold interests: The lease is dated 20th September 1989 and made between [NAME] and [NAME] for a term of 99 years from 31st March 1989 at an annual ground rent of £75 pounds for the first 33 years , rising to £125 for the next 33 years, then £200 for the remainder of the term. . The tribunal regards these matters as uncontroversial and they are supported by documents in the bundle. The tribunal will consider the evidence on the following matters: (d) Capitalisation of ground rent: 6.5% per annum (e) Deferment rate: 5% (f) Freehold value (g) The premium payable. The hearing 5. The case was dealt with on the papers on 16th August 2022 with the necessary documents provided in a bundle by the Applicant’s representative.

6. 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.

7. The applicant relied upon the expert report and valuation of [APPELLANT] (Hons) [NAME] , the applicant's valuer. Capitalisation rate 8. The applicant’s valuer considers that capitalisation rates 6.5% are normal. The rent is modest and reviews are at 33 years apart. The tribunal’s determination 9. The tribunal determines that the rate to be used is 6.5%.

Reasons for the tribunal’s determination 10. The tribunal notes that a rate of 6.5% has been used in applicant’s valuer’s experience, it accords with the tribunals own thinking, and in the absence of any specific evidence to show that this should be varied in this case the tribunal will adopt this rate. Deferment rate 11. The applicant’s valuer applies the Sportelli rate of 5% The tribunal’s determination 12. The tribunal determines that 5% is appropriate as the deferment rate. Reasons for the tribunal’s determination 13. The tribunal sees no reason to depart from the Sportelli rate. The relativity The relativity is calculated from the Gerald Eve 2016 graph and the Savills 2016 graph. The average of these is 82.57%. The tribunal is supportive of this approach. Freehold value 14. The applicant’s valuer, values the freehold interest in the subject flat at £440,000, using a 1% addition to take it from £ 435,812. The tribunal’s determination 15. The tribunal determines that the reversionary value of the freehold interest in the subject flat is £440,000. Reasons for the tribunal’s determination 16. The applicant’s valuer has presented comparable properties for the subject flat.

17. The tribunal has considered the evidence which it agrees is appropriate and accepts the adjustments made by an expert witness. Comparables Property Sale Price and Sale Date Lease details [ADDRESS] 2020 £305,000 96-year lease

41 a [ADDRESS] 20 £335,000 110-year lease [ADDRESS] 20 £407,500 93-year lease [ADDRESS] 20 £405,000 999-year lease Flat A , 100, [ADDRESS] 2021 £435,000 Share of Freehold Flat B, [ADDRESS] 21 £340,172 86- year lease

The applicant's valuer analyses these comparables to £487/ sq ft producing £440,000. The tribunal using its knowledge of the area does not disagree with the level of value indicated by the comparables and hence used to determine the freehold vacant possession value. The premium 20. The tribunal determines the appropriate premium to be £45, 586.00 21. A copy of the valuation is annexed to this decision. [NAME]: [NAME] 16th August 2022

ANNEX – RIGHTS OF APPEAL

1. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written application for permission must be made to the First-Tier at the Regional Office which has been dealing with the case.

2. The application for permission to appeal must arrive at the Regional Office within 28 days after the Tribunal sends written reasons for the decision to the person making the application.

3. If the application is not made within the 28-day time limit, such application must include a request to 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 identify the decision of the Tribunal to which it relates (ie give the date, the property and the case number), state the grounds of appeal and state the result the party making the application is seeking

Stage 1 : The loss to the landlord’s interest.

Value of interest before extension

Present Ground rent income

£75

[NAME] (single) 0.58 years @ 6.50% 0.549629285

PV £1 0.00 years @ 6.50% 1.[PHONE] £41.00 Present [NAME] (single) 33.00 years @ 6.50% 13.4590055

PV £1 0.58 years @ 6.50% 0.9642741 £1622.00 Present [NAME] (single) 33.00 years@ 6.5% 13.4590055

PV £1 33.58 years@ 6.5% 0.1206930 £325.00

£1988.00 Reversion £440,000

PV £1 66.58 years @ 5% 0.0388414

£17,090 £19,079

Value of Interest after Extension

Reversion £440,000

PV £1 156.58 years @ 5.00% 0.00048112

£212 Diminution in Value of Landlords Interest

£18,867 Stage 2 : The landlords 50% share of the marriage value

Value of combined

interests before extension Value of extended lease of flat: tenant 99% £435,600

Value of landlord’s interest in the flat after extension

£212

£435.812

Value of Combined interests before extension

Value of existing lease of flat:tenant

82.57% £363,294

Value of landlord’s interest in the flat before extension

£19,079

£382,373 Combined gain on grant of lease extension

£53,439 Landlords share of marriage value at 50%

£26,720.00

The appropriate premium payable excluding costs is the total of the amount payable at step 1 and the amount payable at step 2: £18,867 plus £26,720 being £45,586.