Tenant Granted New Lease Under Leasehold Reform Act

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CAM/22UN/OCE/2021/0002 Property

HMCTS code :

[ADDRESS], Clacton on Sea Essex, [POSTCODE]

PPAPERREMOTE Applicant : [redacted] : [NAME] Respondent : [redacted] (Missing) Representative : NA Type of application : Section 50 and 51 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal members :

Judge Shepherd Mary Hardman FRICS Date of determination and venue : 14th May 2021 virtual hearing on the papers Date of decision : 14th May 2021

DECISION

Covid-19 pandemic: description of hearing This has been a remote hearing on the papers which the parties are taken to have consented to, as explained below. The form of remote hearing was P:PAPERREMOTE. A face-to-face hearing was not held because it was not practicable and all issues could be determined on paper.

Summary of the tribunal’s decision The appropriate premium payable for the new lease is £14988 Background 1. This is an application made by the applicant [NAME] pursuant to section 50 and 51 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 a new lease of [ADDRESS], Clacton on Sea, Essex, [POSTCODE] (the “property”).

2. On 23rd December 2020 [NAME] at Chelmsford Justice Centre made an order pursuant to s. 50 of the Act to the effect that the Applicant was entitled to a new lease. The [NAME] landlord is missing. The case was transferred to the Tribunal to determine the value of the new lease. The property

3. The property comprises a first floor flat in a 2 storey building constructed in the 1930s. It is located in a residential location 1 mile from Clacton town centre and seafront, It is a two bedroom flat with its own front door, a car parking space to the front and use of a communal garden.

4. The Tribunal did not inspect the property but had the benefit of photographs and have checked the location on internet mapping applications . The report of [NAME] of [NAME] dated 10th March 2021 gave a clear and detailed description of the property. The Tribunal accepts the description is accurate.

The tribunal’s determination 5. The tribunal determines that the value of the new leasehold at the date of the application was £14988 The Tribunal is also satisfied as to the proposed form of the new lease. Reasons for the tribunal’s determination 6. The right to a new lease is conferred by Ch 2 of Pt 1 of the 1993 Act. By exercising the right the tenant acquires a new lease of the flat in substitution for his or her existing lease for a term expiring 90 years after the term date at a peppercorn rent ( s.56(1)). The tenant pays a premium which compensates the landlord for the loss of the remainder of the term. In the present case the landlord is missing and the procedure pursuant to ss50 and 51 of the Act has been followed.

7. The premium for the new lease is calculated in accordance with Sch 13, para 2 of the Act and is the aggregate of the following figures : (a) The diminution in value of the landlord’s interest in the flat; (b) The landlord’s share of the marriage value; (c) Any amount of compensation payable.

8. The calculation carried out by Mr [NAME] appears broadly sound. A calculation carried out by the Tribunal is attached as a schedule to this determination. The Tribunal has also considered the contents of the proposed new lease and is satisfied that they are adequate.

9. The tribunal has accepted both the capitalisation and deferment rates adopted by Mr [NAME] as not being unreasonable.

10. It has also accepted the long leasehold value of £110,000 as supported by the comparables provided by Mr [NAME].

11. However it is not persuaded by the methodology of capitalising the equated ground rent over the remaining term, preferring to adopt the

more traditional method of capitalising the ground rent to review in each case.

12. It also finds that the calculation of marriage value is set out in a somewhat unhelpful and unorthodox fashion.

13. The tribunal has accepted the [NAME] of 84.3% but made a ‘no act world ’ deduction of 5.6% as opposed to the 4.7% adopted by Mr [NAME]. The premium 14. On the above basis the tribunal determines the appropriate premium to be £14988. A copy of its valuation calculation is annexed to this decision.

Name: Judge Shepherd Date: 14th May 2021

Appendix attached: Valuation setting out the tribunal’s calculations

Appendix : Tribunal's valuation

Valuation date

11/09/2020

Unexpired term -years

62

Ground rent £100

Capitalisation rate

7%

Deferment rate 5%

Extended lease value

£110,000

Freehold value

£111,111

Existing Lease value

£93,667

[NAME]

84.30%

No act world

5.6

Calculations

Diminution of freehold

Loss of ground rent

£ 100

Years Purchase 29 years @ 7% 12.2777 £1,228

Loss of ground rent

£ 130

Years Purchase 33 years @ 7% 12.7538 £306 PV £1 deferred 29 years

7% 0.18460

Reversion to Freehold

Freehold value

£ 111,111

Present value of £1 in 62 years @ 5% 0.0486 £5,395

£6,929 Less Freehold reversion after extension

Freehold value

£111,111 PV £1 deferred 152 years @ 5% 0.0006 £67

£6,863

Marriage Value calculation

Value of proposed interests

[NAME]

£67

[NAME]

£110,000 £110,067 Value of existing interests

[NAME]

£5,395

[NAME]

£88,421

Sub-Total

£93,817

Total marriage value

£16,250 Landlords share @ 50%

£8,125 Enfranchisement Price

£14,988

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 application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case. 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. If the application is not made within the 28 day time limit, such application 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 application for permission to appeal to proceed, despite not being within the time limit. The application 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 making the application is seeking. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).