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

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL SUBJECT PROPERTY CHAMBER (RESIDENTIAL SUBJECT PROPERTY) Case reference : LON/00BK/OLR/2022/0535 HMCTS code (paper, video, audio) : V: CVPREMOTE Subject property : 207 [NAME], [ADDRESS] [POSTCODE] Applicant : [redacted] (2) Mrs [COUNSEL] : Ms [COUNSEL] [NAME] of counsel Respondent : [redacted] : Ms [COUNSEL] of counsel Type of [NAME] : Section 48 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal members : Judge S [NAME] of determination and venue : 31 January and 01 February 2023 at 10 [ADDRESS] [POSTCODE] (Remote) Date of decision : 14 April 2023

DECISION

© CROWN COPYRIGHT

Summary of the Tribunal’s decision

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The appropriate premium payable for the new lease of the Flat is £259,566. Background 1. This is an [NAME] made by the applicant leaseholders pursuant to section 48 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”), for a determination of the premium to be paid for the grant of new lease of 207 [NAME], [ADDRESS] [POSTCODE] (“the Flat”).

2. By a notice of claim dated 07 January 2022, served pursuant to section 42 of the Act, the applicants’ predecessor in title [NAME] (as personal representative of the late [NAME]) exercised the right for the grant of a new lease in respect of the Flat.

3. By a notice of assignment, dated 14 January 2022, Mr [NAME] assigned the benefit of the notice to the applicants, who have purchased the Flat from Mr [NAME].

4. At the time of the notice Mr [NAME] held the existing lease granted on 28 January 1985 for a term of 177 years commencing on 25 December 1898 and expiring on 24 December 2075 (“the Lease”). The annual ground rents are £100 per annum until 25 December 2014, £200 per annum until 24 December 2047, and £300 per annum thereafter.

5. The applicants proposed to pay a premium of £146,750 for the new lease.

6. On 17 March 2022, the respondent freeholder served a counter-notice admitting the validity of the claim and counter-proposed a premium of £451,470 for the grant of a new lease. The [NAME]

7. In July 2022, the applicants applied to the Tribunal for a determination of the premium of the Flat.

8. Originally, there was a difference between the parties as to other proposed terms of the lease, but those matters have now been settled.

9. Directions were given on 17 October 2022. The hearing 10. The hearing in this matter took place in person on 31 January and 01 February 2023. The applicants were represented by Ms [COUNSEL] [NAME] of counsel. The respondent was represented by Ms [COUNSEL] [NAME] of counsel.

11. Neither party asked the Tribunal to inspect the Flat and the Tribunal did not consider it necessary to carry out a physical inspection to make its determination.

12. The applicants relied upon the [NAME] report and valuation of Mr [RESPONDENT] dated 19 January 2023. The respondent relied upon the [NAME] report and valuation of Mr [NAME] dated January 2023. Location and description 13. The Flat is on the first floor of a six floor mansion block constructed in the early years of the last century. It is built around a courtyard and located at the junction of [ADDRESS] and [ADDRESS] in Central London close to Victoria Station, Pimlico Underground Station and Westminster Cathedral. [NAME]

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contains a number of similar mansion blocks.

14. There is controlled street parking. There are also some 12 parking bays within the courtyard. There is a notice on the wall of the courtyard stating, “[NAME] 204 to 227 RESIDENTS’ PARKING ONLY” The porter told Mr [NAME] that most residents’ cars can be accommodated. Strictly speaking, the Lease prohibits a right to park a car in courtyard (paragraph 8 third schedule). However, we have taken into account that there is de facto parking. Indeed, there is an argument that any existing de facto parking ripened into an easement on the grant of the Lease under s.62 Law of Property 1925.

15. The Flat has a bay window overlooking the courtyard. At the rear the windows face commercial offices. The ceilings are about 10ft 8ins high. The Flat has 3 bedrooms, a reception room with the bay window feature, a bathroom with a WC, a separate WC, cupboards, storage, kitchen and entrance hall.

16. The Lease does not include the separate WC. We find, on the balance of probabilities, that the separate WC was an improvement carried out by a [NAME] and was not part of demise.

Accordingly, we ignore this in our valuation. The gross internal area is, according to a measured survey, 1,407 sq ft.

17. The development is portered, common parts are well presented and there is a lift. Matters agreed between the experts 18. From an agreed statement of facts and the experts’ reports, the following matters were agreed by the time of the hearing: (1) The valuation date is 08 January 2022. (2) The unexpired term of the Lease at the valuation date was 53.96 years. (3) The unexpired term of the intermediate lease at the valuation date was 53.96 years plus one day. (4) The unexpired term of the competent landlord’s lease at the valuation date was 875.94 years. (5) The ground rents are as set out above. (6) The capitalisation rates is 6.0% (7) The deferment rate is 5%. (8) The Flat is described as set out above. (9) The freehold value has a 1% uplift. (10) The premium payable to the intermediate landlord is £1. The issues (1) The value of the existing lease under the statutory assumptions. (2) The freehold vacant possession value. (3) Whether the assumed configuration should include the separate WC (we have already answered that above in favour of the applicant). (4) The premium.

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The comparables 19. The parties were agreed that the most suitable comparables could all be found within [NAME] itself. 20. Between them the [NAME] relied upon the following 11 comparables:

43 [NAME] 46 [NAME] 100 [NAME] 106A [NAME] 107A [NAME] 143B [NAME] 145A [NAME] 178A [NAME] 182 [NAME] 207 [NAME] 211 [NAME] 21. We consider the following identified sales as being the best comparables:

43 [NAME] £1,775,000 46 [NAME] £2,250,000 106A [NAME] £1,100,000 107A [NAME] £1,195,000 143B [NAME] £1,415,000 145A [NAME] £1,000,000 178A [NAME] £1,350,000 182 [NAME] £1,900,000 Time adjustments 22. We prefer to adjust each of the sale prices by the HMLR index rather than by the [NAME] index. This is not one of the best blocks preferred by overseas buyers and is part of the mix of more normal blocks in Central London.

23. The adjustment is as follows:

43 [NAME]

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46 [NAME] £2,775,773 106A [NAME] £1,187,074 107A [NAME] £1,363,363 143B [NAME]

145A [NAME] £1,080,241 178A [NAME] £1,493,063 182 [NAME] £2,343,986 Condition adjustments 24. We accept the adjustments for condition given by Mr [NAME] at electronic pages 193 to 197, save for one double counted parking allowance and a ceiling allowance. The adjusted figures per sq ft are therefore:

43 [NAME] £1,028 46 [NAME] £1,168 106A [NAME] £1,148 107A [NAME] £1,276 143B [NAME] £1,245 145A [NAME] £1,009 178A [NAME] £1,160 182 [NAME] £1,086 25. The mean average is £1,140 per sq ft. We deduct 10% because the second wc was installed by the tenant. As stated above the size of the flat is 1,407 sq ft. The freehold value is £1,443,582 and the long lease value of the Flat is £1,429,146. [NAME]

26. Mr [NAME] deals with [NAME] in paragraphs 7.01 – 7.025 of his report (electronic pages 133 – 137).

27. He says that having reviewed a number of other cases with differing lease lengths and referring to his own experience in settling claims elsewhere, he considers that the appropriate discount for 1993 Act rights should be 5.5% - 5.75%. He adopts the higher discount of 5.75% which derives from an existing leasehold value without Act rights of £647 per sq ft. He adopts his pro rata freehold vacant possession figure of £860 per sq ft, which equates to a [NAME] of 75.23%.

28. He cross checks this figure with the graphs prepared by [NAME] and [NAME]. The average of [NAME] 1996 and 2016, and [NAME] 2016 is 74.93%. Using a blend of both approaches he settled on 75%.

29. Mr [NAME] deals with [NAME] in paragraphs 7.1 - 7.9 of his report (electronic pages 168 – 170).

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30. He takes the average of [NAME] 2016 and [NAME] 2016 which is 73.81%.

31. In comparison, he adjusts the existing lease value to £1,000,000, by taking into account [NAME] value of Act rights (7.87%), the condition of the Flat and the fact that it was an executor’s sale. This produces a [NAME] of 67.3%. He then takes an average of 73.81% and 67.3% which produces a figure of 70.56%.

32. In our view the figure of 70.56% is the more reliable one. Conclusion 33. We have stated the premium at the commencement of this decision. Our calculations are set out in appendix A attached.

Name: Judge Simon Brilliant Date: 14 April 2023

Appendix: Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Subject 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 [NAME] which has been dealing with the case.

The [NAME] for permission to appeal must arrive at the [NAME] within 28 days after the Tribunal sends written reasons for the decision to [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 subject 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

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permission may be made to the Upper Tribunal (Lands Chamber).