Landlord's Right to Review Ground Rent Upheld by First-tier Tribunal

OUTCOME: Dismissed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AY/OLE/2024/0003 Property : 85 [ADDRESS] [POSTCODE] Applicant : [redacted] : [NAME] [COUNSEL], counsel Respondent : [redacted] : [NAME] [COUNSEL], counsel Type of [NAME] : Rent review – s.21(1)(B) of the Leasehold Reform Act 1967 Tribunal members : Judge [NAME] A [NAME] : 10 [ADDRESS] [POSTCODE] Date of hearing Date of decision : 11 March 2025 17 March 2025

DECISION

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The tribunal’s summary decisions (1) The letter dated 1 November 2022 was valid to notify the respondent of

the applicant’s decision to review the ground rent in accordance with the

terms of the [NAME]. (2) [NAME] payable with effect from 13 March 2023 is

£22,750.

The [NAME]

1. This is an [NAME] made pursuant to s.21(1)(B) of Leasehold Reform

Act 1967(‘the 1967 Act’) seeking a determination by the tribunal of [NAME] ([NAME]) payable after review in accordance with

the terms of the [NAME] and pursuant to s.15 of the 1967 Act

Background

2. The Applicant is the registered freehold owner of 85 [ADDRESS] [POSTCODE] (‘the Property’) The Respondent is the

registered leasehold owner of the property pursuant to the terms of a

50 year [NAME] dated 13 March 1998 between the Applicant and [APPELLANT] (‘the [NAME]’). The annual rent reserved under the [NAME] was

£3,250. However, the second schedule of the [NAME] sets out the lessor’s

entitlement to seek a revision of the rent due under the [NAME] payable

after 13 March 2023.

3. By a letter dated 1 November 2022 the applicant informed the

respondent that:

We act for your landlord, The [NAME] of St Pancras Church

Lands Trust. As you probably know, your [NAME] has a ground

rent review with affect from 13 March 2023. We would like

an opportunity to inspect the house on Wednesday 16 November

at 12 noon in order to advise our Client on the rent review…

4. In a letter dated 31 May 2023 the applicant informed the respondent the

ground rent payable with effect from 13 March 2023 is valued at £23,500

per annum. Subsequently, the applicant made this [NAME] to the

tribunal.

3 The issues

5. The respondent submitted:

(i) The letter of 1 November 2022 was insufficient to give

notice to the respondent of the applicant’s intention to

review the ground rent; and

(ii) The Notice is invalid; and

(iii) The Applicant has missed the opportunity to review the

rent; or in the alternative,

(iv) The reviewed rent should be £15,750 per annum.

The hearing

6. A remote video hearing was held at which the applicant was represented

By [NAME] [COUNSEL] [NAME] and the respondent was represented by

[NAME] [COUNSEL] [NAME]. The parties relied on the valuation

reports of [NAME] [NAME] [NAME] dated 4 March 2025 and [NAME]

[NAME] [NAME] dated 4 March 2025 respectively and both gave

oral evidence to the tribunal. A digital bundle of 38 pages was also

provided to the tribunal.

7. A Statement of Agreed Facts was provided to the tribunal in which the

valuers agreed the following valuation matters:

(i) [NAME] review is to be carried out in

accordance with Section 15 of the Leasehold Reform Act

1967.

(ii) The valuation date is 13 March 2023.

(iii) The “standing house” approach should be used to

determine the revised rent.

(iv) For the “entirety value” there is no requirement to

disregard any improvements carried out by the [NAME] and

we should assume the property to be modernised, in good

condition, fully developing the value of the site. We are

looking for the value of the most valuable house can be

built on the site within the planning constraints at the

valuation date.

(v) The site value should be taken to be 35% of the entirety

value.

(vi) The site value should be decapitalised at 5%.

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[NAME]([NAME]) issue

8. The applicant relied on the oral evidence of [NAME] [APPELLANT] who spoke to his

report of 4 March 2025. [NAME] [NAME] told the tribunal that he had sought

out and relied on a number of sales of comparable properties from which

he was able to extrapolate the price per square foot. He then adjusted

for thetime between the date of sale and the valuation date of 13

March 2023 and using the agreed percentages arrived at a [NAME] of

£23,500.

9. On cross-examination [NAME] [NAME] conceded he had not taken into

account the absence of a dropped kerb in the front garden area which

was being used by the respondent as a parking space. Therefore, he

conceded that a deduction of £5,000 should be made to the ‘entirety’

price of £1,350,000. This produced an adjusted sales figure of

£1,345,000 and a revised price per square feet of £551. This resulted in

a [NAME] of £23,440 per annum.

10. In contrast, [NAME] [NAME] adopted a ‘holistic’ approach as he told the

tribunal buyers of residential property did not buy of a per square

footage basis but rather on the size of the property and the amenities it

offered. Therefore, [NAME] [NAME] stated he had taken an entirety figure of

£900,000 as being reflective of the best, most modern property that

could be built on the site of the subject property. [NAME] [NAME] stated that

in reaching this figure he had taken into account the lack of a dropped

kerb providing lawful permitted access to the front garden parking area.

Therefore, after applying the agreed percentages the [NAME] is £15,750 per

annum.

11. Om cross-examination, [NAME] [NAME] accepted he had not used a per

square footage approach and did not accept that it was appropriate to do

so. [NAME] [NAME] asserted that even though the subject property was larger

than the comparables and on his valuation he accepted the applicant’s

calculation that it produced a figure of £369 psf which was considerably

lower than any of the comparable properties although a larger property.

This did not properly reflect the fact that the overall plot that could be

taken into account was smaller than the other comparable properties

and asserted that the bigger the property the lower the price per square

foot.

The Notice issue

12. At the hearing, [NAME] [NAME] asserted the letter of 1 November 2022 was a

valid notice of the applicant’s intention to review the rent as it made clear

that:

(a) The letter was written on behalf of the landlord. (b) It made reference to a landlord and a [NAME]. (c ) It drew attention to the existence of a rent review clause.

5 (d) It stated the date from which the review of the rent would take

place: 13 March 2023. (e) A request was made for an inspection of the property. (f) The inspection was for the purposes of the Landlord being advised

as to reviewing the rent in accordance with the [NAME]’s provision

for a rent review.

13. [NAME] [NAME] also submitted that the letter of 1 November 2022 gave the

necessary notice within the last year of the 25 years and before 13 March

2023. He submitted that there was nothing in the 1967 Act that

required the review of the rent to have been concluded before the 13

March 2023 or that a particular form of the Notice was required, other

than it should be in writing. [NAME] [NAME] conceded that if this letter was

not a valid notice of the applicant’s intention to review the ground

rent, then the letter of 31 May 2023 was ‘out of time.’

14. [NAME] [NAME] told the tribunal that the letter of 31 May 2023 was the logical

consequence of the first letter: i.e. having previously given you notice

that we will review the rent, we have now done so and this is what we

seek to be paid by you as rent from the date permitted in the [NAME].

15. [NAME] [RESPONDENT] for the respondent, told the tribunal that The [NAME] does

not contain a right to review the rent save on notice given in accordance

with the requirements of the [NAME]. The requirements of the [NAME] are

that notice must be given before the expiry of the 25th year as the [NAME]

does not permit later notice nor provide for any other mechanism to

review the rent.

16. [NAME] [NAME] submitted that the letter of 1 November 2022 did not

amount to a notice required under the 1967 Act as it merely amounted to

a request to inspect the property and not notice of a review of the rent.

[NAME] [NAME] submitted that the letter of 31 May 2023 amounted to a

notice of the applicant’s intention to review the rent but this was out of

time. As the [NAME] does not contain a right to review of the rent save on

notice and the [NAME] does not permit later notice nor provide for any

other mechanism to review the rent, the applicant’s letter of 31 May

2023 was too late to trigger the rent review clause. Therefore, the

rent had to remain at the existing level.

The tribunal’s reasons – the [NAME] issue

17. The tribunal preferred the analytical approach of [NAME] [NAME] to the

holistic approach adopted by [NAME] [NAME] which it found lacked

credibility, although it found neither of the two reports wholly

satisfactory. The tribunal found the majority of the sales relied upon by

[NAME] [NAME] were of limited evidential value as they were either too late

or too early in time or too big or too small. However, the tribunal did

accept that the sales figures for a number of other properties in the

vicinity did indicate that an entirety figure in the region of £1.3m would

be within the range of what could be achieved as at the valuation date.

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18. Therefore, by applying the valuers’ agreed percentages, the tribunal

determined that [NAME] payable by the respondent with

effect from 13 March 2023 is £22,750.

The tribunal’s reasons – the Notice issue

19. S.15(2) of the 1967 Act states:

The new tenancy shall provide that as from the original term date the rent payable for the house and premises shall be a rent ascertained or to be ascertained as follows:—

(a) the rent shall be a ground rent in the sense that it shall

represent the letting value of the site (without including

anything for the value of buildings on the site) for the uses

to which the house and premises have been put since the

commencement of the existing tenancy, other than uses

which by the terms of the new tenancy are not permitted

or are permitted only with the landlord’s consent;

(b) the letting value for this purpose shall be in the first

instance the letting value at the date from which the rent

based on it is to commence, but as from the

expiration of twenty-five years from the original term

date the letting value at the expiration of those twenty-

five years shall be substituted, if the landlord so requires,

and a revised rent become payable accordingly;

(c ) the letting value at either of the times mentioned shall be

determined not earlier than twelve months before that

time (the reasonable cost of obtaining a valuation for the

purpose being borne by the tenant), and there shall be no

revision of the rent as provided by paragraph (b) above

unless in the last of the twenty-five years there

mentioned the landlord gives the tenant written

notice claiming a revision.

20. The Second Schedule of the [NAME] provides:

1. In accordance with Section 15 (2)( of the Act the rent

payable under this [NAME] as from the date hereof (Subject

to review as hereinafter provided) shall be the ground

rent as at that date in the sense that it shall represent the

letting value of the site of the demised premises ( excluding

the value of the building on the site) for the present use of

the demised premises and all other (if any) the uses to

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which the same have been put since the commencement of

the [NAME].

2. The [NAME] shall have the right to require a revision

of the rent hereby reserved and payable as from the

expiry of the twenty-fifth year of the said term on giving

written notice claiming such revision to the [NAME]

before that date.

3. Upon such written notice being given the said rent

payable from the date aforesaid shall in accordance with

section 15 (2) of the Act be the ground rent as at that date

in the sense that it shall represent the letting value of the

site of the demised premises (excluding the value of the

building on the site) for the then present use of the demised

premises and all other (if any) the uses to which the same

have been put since the commencement of the [NAME] AND in default of agreement shall be determined by

the Lands Tribunal in accordance with section 21 (1) of the

Act.

21. The tribunal finds that the commonsense interpretation of the letter of 1

November 2022 is that it informs the [NAME] of the landlord’s intention

to review the rent. The tribunal does not accept that its only purpose was

to request an inspection or that the respondent read it that way. The

tribunal finds that any [NAME] of this letter would have taken it to mean

the landlord was intending to put the rent up.

22. The tribunal accepts [NAME] [NAME] submission on the validity of this letter

as a notice of review and that a specific written form of words is not

required by the [NAME] or prescribed by the 1967 or other Act. The tribunal

did not accept that it was the letter of 31 May 2023 that provided the

requisite notice. The tribunal accepts [NAME] [NAME] submission that this was

simply a ‘follow up letter’ to the notice already given in November 2022,

as the letter of 1 May 2023 stated:

Further to our letter dated 1 November 2022, we have been

instructed by your landlord, The [NAME] of St Pancras Church

Lands Trust, to implement the ground rent review in your [NAME].

Your [NAME] was granted under the provisions of the Leasehold

Reform Act 1967, being for 50 years from 13 March 1998, and

there is a review of the ground rent under the provisions of s15(2)

of the Act with effect from 13 March 2023. We propose that with

effect from 13 March 2023, the rent should be £23,500 pa…

23. In conclusion, the tribunal finds the rent review clause was validly

implemented by the applicant and that [NAME] payable

with effect from 13 March 2023 is £22,750 per annum.

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Name: Judge Tagliavini

Date: 17 March 2025

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] should be made on Form RP PTA available at https://www.gov.uk/government/publications/form-rp-pta-[NAME]-for- permission-to-appeal-a-decision-to-the-upper-tribunal-lands-chamber 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).