Tenant Granted New Lease with Premium Determined by Tribunal

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AY/OLR/2019/0115 Property : [ADDRESS], [POSTCODE] Applicant: [redacted] : [NAME] [COUNSEL] of [COMPANY] Respondent : [redacted] [COUNSEL] (deceased) [COUNSEL] (deceased) Representative : None Type of [NAME] : Section 50 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal members : [NAME] P [NAME] Date of determination and venue : 12 April 2019 at 10 [ADDRESS] [POSTCODE] Date of decision : 12 April 2019

DECISION

Summary of the tribunal’s decision (1) The appropriate premium payable for the new lease is £9,900. Background 1. By an order dated 15 January 2019 made by the County Court at Clerkenwell and Shoreditch the applicants claim for a new lease was transferred to this tribunal for determination as to the terms of the new lease and of the appropriate sum to be paid as a premium in accordance with s51(5) of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”). 2. [ADDRESS] was satisfied that the defendants are deceased and that no grant of probate or letters of administration have been granted. [ADDRESS] was also satisfied that at the date of [NAME] the [NAME] the claimants had the right to acquire a new lease of the Ground floor flat at 9 [ADDRESS] [POSTCODE] and at the date of [NAME] the [NAME] a notice under s42 of the Act would not have been precluded. The issues Matters agreed 3. There are no agreed matters Facts 4. The Tribunal finds the following facts: (a) The subject property is a self-contained, ground floor converted flat constructed in about 1900 in a three-storey terraced house The flat was originally a 1 bedroom flat with a second bedroom added by the leaseholder. (b) The gross internal floor area is 44 square metres, which equates to 474 square feet, excluding a tenant’s improvement of an extension dating from 2009; (c) The valuation date: 7 September 2018; (d) Unexpired term: 81.3 years; (e) Ground rent: £100 for the first 33 years rising to £200 for the next 33 years rising to £300 for the remainder of the term; (f) Long leasehold (unimproved) value: 99% of the freehold (unimproved) value; (g) Capitalisation of ground rent: 7% per annum; and (h) Deferment rate: 5%.

The hearing 5. The tribunal considered the matter on the papers on 12 April 2019. A written valuation was provided by [NAME] [NAME] [NAME] of Clarke Hillyer, an RICS Registered Valuer. [NAME] [NAME] valuation is £9,900 (nine thousand nine hundred).

6. There were no representations on behalf of the respondent.

7. The tribunal did not consider it necessary to carry out a physical inspection to make its determination. Comparable evidence 8. In assessing the capital value of the flat [NAME] [NAME] provides detail of five comparables: 23 [ADDRESS] [POSTCODE], a flat in an adjacent road on the ground floor with 2 bedrooms. The flat also has a garden. The flat sold in July 2018 for £535,000 with 109 years unexpired on the lease. The area is 61.8 sq m (665 sq ft). The price analyses to £8658 per sq m 19a [ADDRESS] [POSTCODE], a split level upper flat with no garden. The flat has 2 bedrooms and an area of 90.4 sq m (973 sq ft). The lease has 108 years unexpired. The flat sold for £470,000 in September 2018 which analyses to £6363 per sq m. 26 [ADDRESS] [POSTCODE], another split level upper maisonette with 2 bedrooms. The lease has 94 years unexpired and an area of 71.4 sq m (769 sq ft). The flat sold for £454,000 in March 2018 which analyses to £6579 per sq m 48 [ADDRESS] [POSTCODE] a 1 bed flat with garden and an unexpired term of 121 years. The tribunal does not accept the analysis presented which looks clearly wrong. The sale price was £454,000 which is analysed to £1009 per sq m which implies an area of 450 sq m which is unlikely. 55b [ADDRESS] [POSTCODE], a first floor 2 bedroom flat with 152 years unexpired. The flat sold in June 2018 for £494,000 which analyses to £9686 per sq m. The implied area is 51 sq m (549 sq ft). 9. [NAME] [NAME] considers the market was static across the range of dates and makes no adjustment for this. [NAME] [NAME] considers the range should reflect the smaller size and garden of the subject property and considers the higher end of the range of analysis is appropriate and considers a rate of £9500 per sq m is appropriate. This gives a value of £418,000.

10. [NAME] [NAME] also considers that there is limited evidence of 1 bedroom flats which would sell in the range £400,000 to £450,000. 11. [NAME] [NAME] makes a 1% addition for the benefit of the freehold over the value of an extended lease which he considers is standard practice. This brings the market value of the unimproved freehold to £422,180.

12. The lease is over 80 years so no marriage value is payable. The tribunal’s determination 13. The Tribunal values the premium payable at £9,900 (nine thousand nine hundred) Reasons for the tribunal’s determination 14. The tribunal determines that the valuation presented by [NAME] [NAME] is in line with market practice and is supported by the evidence presented. Lease terms 15. A draft Deed of Surrender and Regrant is included in the bundle. This grants a new term for 189 years from 1 January 2001 on the same terms as the existing lease subject to a landlords right to break for redevelopment at any time in the 12 months ending on 1 January 2100 or at any time in the 5 years ending on 1 January 2190. This is in accordance with the Act. The tribunal’s determination 16. The tribunal determines that the terms of the new lease are to be those presented as a draft. The premium 17. The tribunal determines the appropriate premium to be £9,900. A copy of its valuation calculation is annexed to this decision.

Name: [NAME] Valuer Chair Date: 12 April 2019

Appendix: Valuation setting out the tribunal’s calculations

Address Client Valuation Date 07 September 2018 Existing lease Expiry Date 31 December 2099 Years unexpired 81.31 Length of new lease 171.31 Rent Years Yield Cap Rate P/V Multiplier Term Value Existing Ground Rent £100 Basis of review Term 1 £100 15.32 7.00% 9.2173 1 9.2173 £922 Date of 1st review 31 December 2033 Years to 1st review 15.32 Length of period 33 1st Review £200 33 7.00% 12.7538 0.3548 4.5249 £905 Rent at 1st review £200 Date of 2nd review 31 December 2066 Years to 2nd review 48.31 2nd Review £300 33 7.00% 12.7538 0.0380 0.4853 £146 Length of period 33 Rent at 2nd review £300 Date of 3rd review 3rd Review £0 0 7.00% 0.0000 3072.1194 0.0000 £0 Years to 3rd review -118.69 Length of period £1,972 Rent at 3rd review Capitalisation Rate 7.00% REVERSION VALUE Deferment Rate 5.00% Capital Value Years to Reversion Deferment Rate P/V Reversion Value Long Lease Figure £0 £422,180 81.31 0.05 0.0189 £7,989 F/H to Long lease change 99% Freehold figure £422,180 TOTAL EXISTING FREEHOLD VALUE £9,962 Real World Short Lease Value No Act Discount LESS Relativity Rate Value of freehold after extension Current Lease Value £0 Capital Value Years to Reversion Deferment Rate P/V Reversion Value £422,180 171.31 5.00% 0.0002 £99 Extension price payable £9,863 But Say £9,900 EXISTING FREEHOLD TERM VALUE ASSESSMENT Basic Infomation TERM VALUE

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] 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).