Freehold Enfranchisement Prices Set for Two Properties

OUTCOME: Allowed

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FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case reference

: MAN/00CG/OAF/2023/0029 MAN/00CG/OAF/2023/0015 Properties

: 20 & 40 [ADDRESS], [POSTCODE] First Applicants

: [redacted]

Representative

:

: [COUNSEL] & [COUNSEL]

[NAME] [RESPONDENT], [NAME]

First Respondent: [redacted]

Representative

:

: [RESPONDENT] Solicitors

Type of Application

: Leasehold Enfranchisement

Tribunal Members

: [NAME] [NAME] [NAME] [NAME] [NAME] of Hearing : Paper Determination 3 July 2025

Date of Decision :

3 July 2025

Date of Determination : 06 August 2025

DECISION

CROWN COPYRIGHT 2025

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Decision

(1) The total price payable by the First Applicants for the freehold interest in 20 [ADDRESS], [POSTCODE] is £1,716.75, made up as £1,327.65 to the First Respondent and £389.10 to the Second Respondent. (2) The total price payable by the Second Applicants for the freehold interest in 40 [ADDRESS], [POSTCODE] is £1,809.11, made up as £1,419.61 to the First Respondent £389.50 and to the Second Respondent. (3) The form of transfer to be used to convey the freehold in each case is to be as shown in generic form in Appendix 3.

The Background 1. The Tribunal has received two applications under s.21(1)(a) of the Leasehold Reform Act 1967 (“the Act”) to determine the price payable for the house and premises in the case of each of the Properties in accordance with s.9 of the Act. The subject properties are 20 [ADDRESS], [POSTCODE] (“[ADDRESS]”) and 40 [ADDRESS], [POSTCODE] (“[ADDRESS]”). The applicants in the case of [ADDRESS] are the First Applicants and the applicants in the case of [ADDRESS] are the Second Applicants. In both cases, the First Respondent is the freeholder and the Second Respondent is the head lessee.

2. The Second Respondent’s head leasehold interest, out of which numerous underleases – including those on both subject properties – have been granted, is for the residue of a 125-year term from 3 December 1993 at a total ground rent of £3,000 per annum.

3. The underleases on which each of the subject properties are held are both for a term of 125 years less one day from 3 December 1993 at a ground rent of £50 per annum.

4. The date of the First Applicants’ claim to acquire the freehold to [ADDRESS], and hence the valuation date for that property, is 30 August 2023.

5. The date of the Second Applicants’ claim to acquire the freehold to [ADDRESS], and hence the valuation date for that property, is 3 August 2022.

6. These matters have been before the Tribunal for some significant time, the two applications having been made on different dates in latter part of 2023. Over the course of this time, the Tribunal has issued a number of orders and directions in order to facilitate dealing with the matters fairly and justly. Of relevance in the context of this decision:

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a. On 31 May 2024, the First Respondent was barred from proceedings and the Second Respondent was appointed Reversioner for the purposes of the Act in the First Respondent’s place. b. On 9 April 2025, the Tribunal ordered that the cases for [ADDRESS] and [ADDRESS] be consolidated. c. Also on 9 April 2025, the parties were directed to produce a jointly drafted statement setting out a clearly itemised summary of agreed and disputed points, both as regards valuation and the proposed form of transfer.

7. Notwithstanding the direction referred to in 6(c) above, no joint statement was provided. This is particularly regrettable as the parties in both cases indicated that they wished for the cases to be applications to be dealt with without the benefit of a hearing, making the need for clearly organised and unambiguous paper submissions all the more important. In the circumstances, the Tribunal was left with no alternative but to draw conclusions from papers which were less clear than the Tribunal would have wanted.

Evidence and Submissions 8. The Tribunal received expert witness reports on both properties from [NAME] [COUNSEL] [NAME], who was instructed by both sets of Applicants, and [NAME] [COUNSEL] [NAME] who was instructed by the Second Respondent. In addition, both experts provided further correspondence following directions of the Tribunal.

9. There were clearly areas of common ground between the parties in respect of certain valuation inputs and valuation approach. The Tribunal was, however, not assisted by the failure of the parties to comply with the direction to produce a clear statement of agreed and disputed facts.

Valuation 10. For the valuation of the First Respondent’s freehold interest in each case, the Tribunal adopted the usual three stage approach typically used under s.9(1) of the Act: (1) capitalise the annual rent until the expiry of the term of the lease – referred to as “term 1”, (2) calculate the modern ground rent and capitalise this for 50 years and then defer

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the capitalised sum to the date of valuation – referred to as “ term 2”, (3) defer the market value of the standing house for term 1 plus term 2 which is referred to as “the reversion”.

11. For the valuation of the Second Respondent’s leasehold interest in each case, the Tribunal valued based on the net rent receivable by the Second Respondent (“profit rent”), to be capitalised over the term of the lease.

12. The Tribunal’s first task was to consider the relative positions of the head leaseholder and the freeholder. Under the head lease, the Second Respondent is obliged to pay a total ground rent of £3,000 to the First Respondent. [NAME] [RESPONDENT] writes that the head lease covers “by [his] calculation 140 properties”. [NAME] [NAME] apportionment of the annual head lease rent is, on this basis, £21.43 per property. The Tribunal notes, however, that a figure for the apportioned head lease ground rent is shown in paragraph 12.7.6 of the draft transfer provided at £21.74 per property, which would imply the head lease covers only 138 properties. On the basis that (i) [NAME] [NAME] is not claiming to know definitively that the number of properties is 140 and (ii) he has not objected to the draft transfer, the Tribunal adopts £21.74 as the apportioned rent in respect of the valuation of the freehold. The profit rent adopted in respect of the valuation of the head lease is £28.26, calculated as the £50 underlease rent less the apportioned headlease rent.

13. There was no dispute as to the entirety values of the two properties, with both experts adopting £325,000 for [ADDRESS] and £375,000 for [ADDRESS]. It was further agreed that a percentage of 35% should be adopted for the site value. Most of the other valuation inputs were the subject of disagreement between the experts (or the position was not clear).

14. For the sake of clarity and brevity, the remaining valuation inputs adopted by the Tribunal in both cases are set out below. Our full valuations are provided as Appendices 1 and 2 to this decision. a. Term 1 capitalisation rate - 6.5% b. Site value decapitalisation rate – 5.25% c. Term 2 capitalisation rate – 5.25% d. Deferment Rate – 5.25% e. Leasehold interest capitalised using dual rate YP of 7% (remunerative rate) and 2.5% (sinking fund rate) (no tax)

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f. The Tribunal does not find it appropriate in the circumstances to make any deduction from reversionary value the for risk of a tenancy arising upon expiry under Sch.10 of LGHA 1989.

Form of Transfer 15. The Tribunal was provided with a draft form of transfer by the Second Respondent’s solicitors. The [NAME], having been provided with the opportunity to advise the Tribunal of any objection to the proposed form of transfer, raised no such objection. The Tribunal, therefore, takes it that this is an agreed matter. For the avoidance of doubt, a copy of the form of transfer (redacted so it is in generic) is provided as Appendix 3 to this decision. Appeal 16. If any party is dissatisfied with this decision an application may be made to this Tribunal for permission to appeal to the Upper Tribunal, Property Chamber (Residential Property) on a point of law only. Any such application must be received within 28 days after these reasons have been sent to the parties under Rule 52 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. [NAME] 3 July 2025

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Appendix 1 –[ADDRESS], Sheffield Freehold Interest Term

Apportioned Ground Rent £ 21.74

YP for 95.26 yrs @ 6.5% 15.3464

£ 333.63

Term 2

Entirety Value £ 325,000

Site Apportionment @ 35% £ 113,750

Modern Ground Rent @ 5.25% £ 5,971.88 p.a.

YP for 50 yrs @ 5.25% 17.5728

£ 104,943

PV of £1 in 95.26 yrs @ 5.25% 0.00764

£ 801.76

Reversion 2

Market Value of Standing House £ 325,000

@ 100% for Assured Tenancy £ 325,000

PV of £1 in 145.26 yrs @ 5.25% 0.00059158

£ 192.26

Enfranchisement Price (excluding costs)

£1,327.65

Head Leasehold Interest

Rent Received £ 50.00 p.a.

Lees Apportioned Ground Rent £ 21.74 p.a.

Profit Rent £ 28.26 p.a.

YP for 95.26 yrs @ 7%2.5%(t0%) 13.7686

Enfranchisement Price (excluding costs)

£389.10

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Appendix 2 –[ADDRESS], Sheffield

Freehold Interest Term

Apportioned Ground Rent £ 21.74

YP for 96.33 yrs @ 6.5% 15.3489 £ 333.69

Term 2

Entirety Value £ 375,000

Site Apportionment @ 35% £ 131,250

Modern Ground Rent @ 5.25% £ 6,890.63

YP for 50 yrs @ 5.25% 17.5728 p.a.

£ 121,088

PV of £1 in 96.33 yrs @ 5.25% 0.0072334 £ 875.88

Reversion 2

Market Value of Standing House £ 375,000

@ 100% for Assured Tenancy £ 375,000

PV of £1 in 146.33 yrs @ 5.25% 0.0005601 £ 210.04

Enfranchisement Price (excluding costs)

£1,419.61

Head Leasehold Interest

Rent Received £ 50.00 p.a.

Lees Apportioned Ground Rent £ 21.74 p.a.

Profit Rent £ 28.26 p.a.

YP for 96.33 yrs @ 7%2.5%(t0%) 13.7829

Enfranchisement Price (excluding costs)

£389.50

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Appendix 3 –Draft Form of Transfer

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