Tenant Ordered to Pay £10k in Costs Due to Unreasonable Conduct

OUTCOME: Dismissed

© CROWN COPYRIGHT

Rev. 1-2017

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

:

CHI/43UM/OCE/2020/0005/6

Property

:

Blocks 1-20 & 21-32, 7,9,11,13 [ADDRESS] [POSTCODE]

Applicant: [redacted]

:

[NAME] [APPELLANT]

Respondents

:

[redacted]

:

[NAME] [COUNSEL], counsel instructed by [COUNSEL] LLP

Type of Application

:

Collective Enfranchisement : Section 24(1) Leasehold Reform and Urban Development Act 1993 (The Act)

Tribunal Member(s)

:

Judge [NAME] of hearing

Date of determination

:

:

10th and 12th February 2020

13th April 2021

DECISION

2

Background

1. Two applications have been made under section 24(1) of the Leasehold Reform Housing and Urban Development Act 1993 by the Applicant as the nominee purchaser in each seeking to collectively enfranchise the freehold of the Property. The Respondent is the same in respect of each notice. The two matters were joined together.

2. Directions were given at a telephone CMH on 18th November 2020. Those directions have been substantially complied with and the Tribunal had before it an electronic bundle and skeleton arguments from both sides. References in [] are to pages in the electronic bundle.

3. Ms [APPELLANT] represented the Applicants and relied upon expert evidence from [NAME] [RESPONDENT] [NAME]. The Respondent was represented by [NAME] [COUNSEL] of counsel. [NAME] [COUNSEL] of [NAME], solicitors for the Respondent, also attended. [NAME] [RESPONDENT] relied on expert evidence from [NAME] [RESPONDENT] and also from [NAME] [RESPONDENT], director of the Respondent company.

4. The hearing took place by [NAME]. The hearing commenced on 10th February 2021 but could not be concluded in one day. The hearing resumed, again by [NAME] with the same representatives on 12th February 2021. Neither parties’ valuer nor [NAME] attended the second day of the hearing. The second day was to hear closing submissions on behalf of the Respondent and the Applicant’s reply to the same.

The Law

5. The relevant law is contained within the Leasehold Reform Housing and Urban Development Act 1993 (“the Act”). Attached to this decision is an Appendix setting out the relevant provisions to which we have had regard in reaching this decision.

Hearing

6. Set out below is a synopsis of the submissions made and evidence heard by the Tribunal. In this we seek to record the most pertinent parts but it is not a complete record of everything said.

7. The hearing took place by remote hearing using [NAME]. The hearing on both days was recorded. The Tribunal was satisfied that all parties were able to take part adequately in the proceedings and it had been appropriate to proceed using the [NAME] remote hearing system.

3 Throughout the hearing the Tribunal adjourned regularly to allow the parties breaks.

8. At the start of the hearing the Tribunal clarified with the parties the issues to be addressed:

• What was to be enfranchised under the two notices served? [7- 28] • Had the parties reached a binding agreement as to the Premium payable? • If there was no agreement what was the proper premium payable by the Applicants to the Respondent for enfranchisement of the property claimed under the two notices? • What was the correct form of contract/transfer to be adopted?

9. [NAME] [NAME] indicated that he reserved the right to object to certain documents included within the bundle. The Applicants had filed no witness evidence but had included within the bundle various additional documents which had not been provided as part of the directions but were included in the bundle prepared by the Applicant. Ms [APPELLANT] stated that she believed that in preparing the bundle she was entitled to include any documents upon which the Applicant sought to rely.

10. The Tribunal confirmed it had read in advance of the hearing the whole of the bundle and each parties’ skeleton arguments.

11. It was agreed [NAME] [NAME] could challenge any documents if relied upon by the Applicants.

12. The parties agreed that notwithstanding arguments over whether or not an agreement had been reached as to the Premium they wished the Tribunal to hear evidence upon the valuation and to make a determination on the valuation even if it determined agreement had been reached.

13. The parties valuers had signed a memorandum of agreed facts [59]. This recorded the following as agreed:

• Valuation date: 30th September 2019 • Marriage value Flat 28: 50% • Hope of marriage value Flats 2,3,5,10,13 and 26: 15% • Deferment rate: 5%

14. Ms [APPELLANT] explained that the Applicant had intended to claim the whole of the Respondents title registered at the Land Registry under title number SY429029. In her submission it was clear that this was what the Applicants were seeking. In her submission it was ridiculous for the Respondent to take advantage and suggest that when you considered

4 the two plans (see [18 & 28]) there was a strip of land that was not included. She stated she had spoken to both [NAME] and [NAME] [RESPONDENT] (the Respondent’s valuer) and told them she was expecting to enfranchise the whole of the Respondent’s title.

15. Ms [APPELLANT] explained on questioning by the Tribunal that the Applicant had not made an application to the County Court over the question of the plans not enfranchising the whole of the title due to the costs involved in the same. She stated she believed that the Respondent was attempting to obfuscate the situation and simply attempting to get the Applicant to run up lots of unnecessary costs. In her view the Tribunal should apply a “common man” approach and determine that a reasonable recipient would accept that it was the whole of the title they were looking to enfranchise. She referred to the fact that nothing in the two counter notices gave any indication that there was a strip of the respondent’s title not included in the two notices served.

16. Turning to the question of agreement Ms [APPELLANT] stated she was looking to agree the premium on the basis that the whole of the title was to be enfranchised. She was not agreeing with [NAME] [NAME] if it was not the whole of the title. Further she suggested that any acceptance was subject to conditions including that no further Tribunal costs would be incurred. Given the matter had now proceeded to Tribunal and the Applicants had incurred further costs she suggested the conditions of the offer meant it was no longer capable of being accepted.

17. Ms [APPELLANT] suggested that the Respondent and their valuer were seeking to deceive the Applicants. Ms [APPELLANT] referred to various emails (see for example [117 & 125]) which refer to her exercising the “statutory rights under collective enfranchisement”. She states that it was clear that any prices she proposed was on the basis of the whole of the Respondents title being transferred. Ms [APPELLANT] denied receiving a letter from [APPELLANT] of 28th August 2020 [747 & 748]. Ms [APPELLANT] indicated she thinks the email may have gone into her Junk filter [135].

18. Ms [APPELLANT] further suggested that she was not bound by the offer as she did then incur Tribunal costs and it was made on the basis that these were avoided. Ms [APPELLANT] stated she believed after the price had been agreed the only issue was over the roof space lease and how to deal with that.

19. Ms [APPELLANT] called [NAME] as her expert surveyor. [NAME] [NAME] relied upon his report and appendices [237-305].

20. [NAME] [NAME] was cross examined by [NAME] [NAME]. He confirmed that he was made a director of [NAME] in 2019 and became a Member of RICS in 2018 or 2019, he was unable to remember which.

21. [NAME] [NAME] conceded that he should have calculated the value for non- participating flats on the basis of the unimproved value.

5 22. In calculating the values he relied upon 5 transactions representing 4 flats in the Property as one had sold twice. He stated this produced an average of £443 per square foot.

23. [NAME] [NAME] had also used other comparables. He accepted he had not annexed to his report the Index he relied upon to Index the comparables contained within the Property. He stated the Index was the Land Registry Index which was a publicly available index which he considered to be accurate but only up to a few years. [NAME] [NAME] stated that those transactions he could ascertain he listed although he did not have the sales particulars in front of him and had not annexed them to his report. He stated he was trying to give a broad cross section of evidence.

24. [NAME] [NAME] was asked if transactions within the Property produced an average of £443 per sq ft why did he look at those outside of the Property which resulted in a significantly lower average price per square foot? His response was that in his opinion there was not a right or wrong way. You should not look at comparables in isolation and should provide a cross section.

25. [NAME] [NAME] agreed that in respect of reference to [NAME] having agreed lease extensions [250] he had worded this badly and should have said “possibly” without representation. [NAME] [NAME] took the view that if the [NAME] had been properly represented they would not have agreed the rent review patterns entered into.

26. [NAME] [NAME] accepted he did not know the rent review patterns for the auction comparables he referred to in his report [250]. [NAME] [NAME] stated he did not accept the rate in the Melluish case was appropriate.

27. [NAME] [NAME] did not accept he should index all of his comparables. He had done so for those within the Property but did not do so for others as he felt the timescale was small and therefore in his opinion not appropriate.

28. [NAME] [NAME] suggested there were certain errors in the report. [NAME] [NAME] stated he would need time to check his figures.

29. The Tribunal asked certain questions of [NAME] [NAME].

30. [NAME] [NAME] accepted Flat 17 was the only sale of a Flat with the original lease [246]. He accepted this was a strong comparable but he stated it needed adjusting. When looking at other comparables he had set his search criteria to within 200m. He tried to find blocks of similar calibre and age.

31. [NAME] [NAME] suggested a capitalisation rate of 10% for onerous leases and 7% for those with non-onerous lease terms. In his view no investor will pay large amounts for onerous ground rent patterns as they will in his opinion have to commute the ground rent at some point in the future.

6

32. The Tribunal adjourned for lunch at this point and [NAME] [NAME] agreed to look at the areas [NAME] [NAME] suggested there were errors.

33. After the adjournment [NAME] [NAME] explained some discrepancies. It appeared it may be the computer programme he used had caused errors such as calculating the number of days and rounding down certain figures.

34. [NAME] [NAME] asked further questions re development value. [NAME] felt there were still many hurdles to be overcome before any development value would become a reality. His view was that he was not suggesting there was no hope just that it was so unlikely as to have no value.

35. On further questioning by the Tribunal [NAME] [NAME] confirmed he had used various databases such as RightMove and LonRes to find his comparables. He had not spoken to any agent mainly he said due to constraints of time.

36. Ms [APPELLANT] indicated that she relied upon her skeleton argument and this concluded the case for the Applicant. Ms [APPELLANT] confirmed she had made all the points she wished to rely upon.

37. It was agreed with [NAME] [NAME] we would hear first from [NAME] [NAME].

38. [NAME] [NAME] agreed his report [307-370] and reply [406-424] was true and accurate. [NAME] [APPELLANT] relied upon this.

39. Ms [APPELLANT] then cross examined [NAME] [APPELLANT].

40. [NAME] [APPELLANT] explained he had previously whilst a director of [NAME] dealt with certain matters relating to the Property including an RTM application. He explained he resigned from HML in or about June 2017. He had been a director but held no shareholding in that company.

41. [NAME] [NAME] confirmed he became aware over the discrepancy over the two notices when discussing the matter with [NAME] in respect of the roof lease and the surrender of the same. [NAME] had been concerned over the loss of development value but believed this offered some protection as he would retain the slither of land. [NAME] [NAME] could not recall the specific date.

42. [NAME] [NAME] confirmed he became involved in or around March 2020 after the counternotices had been served.

43. [NAME] [NAME] confirmed he accessed the building and three flats. His opinion as to value was based on what was in the notices and in his report he covered both scenarios as he was not sure what was to be argued. He confirmed he had not accessed any loft spaces. He explained when he

7 was instructed by Lorienwood they were happy to surrender the roof space lease on the basis that they were retaining the strip of land not included within the two notices.

44. [NAME] [NAME] confirmed he was not a planning expert. He explained he deals with about 70/100 lease valuations per year which often involve questions of “hope” value. He also advises in respect of valuation re developing blocks.

45. In his opinion it is not uncommon for people to purchase loft space when it is not demised. He was referred to various [188] notes from [NAME] saying they would not purchase. [NAME] [NAME] commented he was not sure if they were participants and therefore had a conflict.

46. On questioning by the Tribunal [NAME] [NAME] confirmed he did a RightMove search but then obtained sale particulars for his comparables, he felt in many respects he and [NAME] [NAME] were quite close on values relying upon the sales of flats within the development.

47. In respect of development value he stated that his clients were adamant they could develop the site. His view was that not withstanding the previous refusals there was a good chance planning would be granted given the pressure on local authorities.

48. [NAME] [NAME] then called [NAME]. He confirmed the contents of his witness statement were accurate and true [743-750].

49. Ms [APPELLANT] cross examined [NAME].

50. [NAME] stated that the plan [750] in his witness statement reflected the strip of land not included within the two plans attached to the Initial Notices [18 and 28]. He explained he had the original land registry certificates within his office.

51. [NAME] explained he became aware of the discrepancy prior to instructing [NAME] [NAME]. His recollection was he became aware in or about March 2020. He explained they had served counter notices on the basis of the notices served on behalf of the [NAME].

52. [NAME] said that he had no desire to dispose of his interest but the company would follow the law. In his view the [NAME] would still be liable for the costs of maintaining the retained strip of land.

53. He explained that he gave his own opinion as to value before [NAME] was instructed. He had hoped to be able to negotiate matters himself but when it became apparent that would not be possible he appointed [NAME] [NAME].

54. [NAME] believed the strip of land was a strong negotiating point and way of protecting his company. He accepted that the [NAME] could have included the whole of the title. That was not what the

8 [NAME] included within the notices and his company were reluctant sellers. In his view the site has substantial development value. He candidly admitted he was using the strip of land to his company’s advantage.

55. [NAME] was asked about issues relating to his involvement with the previous agents, [NAME], documents relating to which had been included within the bundle. He explained he had been looking to retire. He explained in his words he had been a “bit naughty” and pulled up in front of RICS but given he was not a member there was nothing they could do.

56. On re-examination [NAME] [NAME] stated he felt could build 12/14 new units. Removing the roof and building would be in his opinion relatively easy.

57. In respect of the slither he said you could look at the plans to the Notices and the word “Ellingham” written across these and from this it was clear there was a slither.

58. At this point the Tribunal adjourned for the day.

59. On resumption [NAME] [NAME] made his closing arguments. [NAME] [NAME] invited us to determine what was to be purchased. He also invited us to determine that the premium had been agreed and in the alternative what the premium should be.

60. [NAME] [NAME] suggests when you look at the two plans [18 and 28] side by side and compare the word “Ellingham” on each it is clear that there is a strip of land not included within the two notices. In particular having regard to the letters “a” and “m” relative to the lines drawn.

61. [NAME] suggests that [NAME], solicitors for the Applicant appeared to accept this [180-182] when they referred to making a County Court application. In his submission this is what should have happened if the Applicants were not happy.

62. In his submission the notices were sufficiently clear. [NAME] [NAME] suggested it was clear from the correspondence and he referred to [116, 117, 125, 128 and 130] that they were only talking about what the Applicants were entitled to under the two notices and the Act. It was the Notices which triggered the process.

63. Turning to the question of agreement [NAME] [NAME] suggests the correspondence after [130] in the bundle is of no assistance. In his opinion [13] shows a clear offer and acceptance of the Premium to be paid £222,500.

64. [NAME] [NAME] says the letter dated 29th August 2020 at [747] setting out the Heads of Agreement from [NAME] to Ms [APPELLANT] must have been received. He relies upon the email exchange at [135 and 138] where Ms [APPELLANT] picks up [NAME] for misquoting the date of this letter. [NAME] [NAME]

9 suggests she would only have been aware if she had received the letter. [NAME] [APPELLANT] relied on the fact that Ms [APPELLANT] did not seek to call any oral witness evidence but was content to rely upon documents. Only evidence is that given by [NAME] [NAME] and paragraphs 13 and 14 of his statement which it was accepted are hearsay evidence.

65. He says there was agreement to a premium of £222,500.

66. Turning to the expert evidence [NAME] [NAME] invited us to prefer the evidence of [NAME] [NAME]. He suggested [NAME] [NAME] had considerable experience and his evidence was clear and careful.

67. [NAME] [NAME] was relatively inexperienced and had allowed a number of basic errors to creep in to his report which he acknowledged in his evidence. By way of example [NAME] [NAME] agreed the deferment rate was 5% but there was an error in his methodology of the valuation. [NAME] [NAME] acknowledged this he did not address the consequences.

68. Further he made adjustments for improvements including in respect of non participant [NAME]. Certain of these adjustments were repairs in any event. This is an incorrect methodology. At [246 and 247] he adjusts for improvements and this is wrong. This meant that about half of the flats had been incorrectly valued.

69. [NAME] [NAME] explained he would round down, not round up and again [NAME] [NAME] suggests this was indicative of an incorrect approach. The terms of Flat 32 was incorrectly stated.

70. [NAME] [NAME] indexed values when it suited and not on others. He used a comparable of a flat outside the development with precious little information.

71. Turning to the lease extensions [NAME] [NAME] made an assumption as to the advice or lack of. He accepted he should modify his wording. [NAME] [NAME] suggests that this approach coloured his view of the valuation.

72. In respect of auction sales of ground rent investments [NAME] [NAME] accepts his approach was unorthodox. [NAME] [NAME] reply refers to St Emmanuel House (Freehold) [COMPANY], St Gabriel House (Freehold) [COMPANY] and St Saviour House (Freehold) [COMPANY] v [COMPANY] (CHI/21UC/OCE/2017/0027,0026 & 0029) known as “All-Saints”. [NAME] [NAME] reaches a figure and says his gut feeling is that it is too high so he disregards the same. [NAME] [NAME] chooses to disregard the decision in Deritend. [NAME] [NAME] took the view that [NAME] [NAME] did not have sufficient experience to disregard this.

73. Turning to development value again [NAME] [NAME] would invite the Tribunal to prefer [NAME] [NAME]. He suggests he would have some idea of development value and he had taken account of the risk.

10 74. In respect of the proposed contract it was agreed the roof space lease would be surrendered. He would invite us to agree the form proposed by his instructing solicitors.

75. In reply Ms [APPELLANT] stated she was not a liar and did not receive the letter dated 28th August 2020. She said she found it in her junk folder.

76. In her opinion the Respondent had not been clear and transparent. The Notices should be interpreted by a reasonable recipient. The lines on the plan are for “generality” and are hand drawn.

77. The Tribunal reminded Ms [APPELLANT] this was her opportunity to make points in reply.

78. In her submission it was well known that Government was looking to reform the area of valuations in respect of enfranchisement and it was right to make reductions as [NAME] [NAME] had done taking account the likely changes which were to come about.

79. In her opinion there was no development value as nothing had crystallised at the date of the valuation. The Respondent had sought planning twice and failed on both occasions. The change to permitted development was after the valuation date and she suggested irrelevant.

80. Ms [APPELLANT] said she could not determine where the “wedge” had come from.

81. The Tribunal again stopped Ms [APPELLANT] and reminded her this was an opportunity to reply to [NAME] [APPELLANT] not set out again her case. Ms [APPELLANT] was unhappy that she was stopped, referring to the time [NAME] [NAME] had.

82. The hearing ended.

Determination

83. The Tribunal thanks both Ms [APPELLANT] and [NAME] for their careful and measured submissions. We have considered everything within the hearing bundle and the skeleton arguments provided by both parties. We also wish to thank the Applicant for providing such a well presented electronic bundle which made the conduct of the hearing easier for all.

84. The Tribunal noted the dissatisfaction of Ms [APPELLANT] at the end of the hearing. The hearing ran over two days hearing evidence from two expert [NAME] and one oral witness. Ms [APPELLANT] did not finish presenting her case until approximately 3.40pm on the first day (which began at 10am). We adjourned at 4.45pm and re-convened with [NAME] [NAME] making closing submissions of just over one hour. The Tribunal throughout the hearing afforded all parties every opportunity to advance their respective cases. The Tribunal allowed Ms [APPELLANT] every opportunity to make all points she wished including allowing all the

11 various documents she had included within the bundle despite these having not previously having been disclosed to the Respondent.

What land is included?

85. The starting point is the notices served and the plans [18 and 28]. We do not accept we have any discretion as to what land is to be enfranchised. In this Tribunal’s judgment it is for the party serving the notices to ensure that any plans attached properly identify the land to be enfranchised. Both notices identify the land to be enfranchised by reference to a plan and markings thereon. That is what the Tribunal must determine the premium for and any other terms of acquisition.

86. We accept that it was the intention of the Applicants that the whole of title number SY429029 was to be enfranchised. We have no doubt this was what they instructed their solicitors to achieve having heard from Ms [APPELLANT] and considering the documents within the bundle.

87. Ms [APPELLANT] suggests the reasonable recipient would have assumed the whole title was included. [NAME] [RESPONDENT] in his evidence was candid in stating that the Respondent is not a willing seller and that he was pleased to find the strip of land as it protected his future development rights over the property as a whole. [NAME] [NAME] accepted that the Applicants may have wanted the whole title but he believed they had not included this within the two plans.

88. We were referred to a letter from [NAME] dated 2nd November 2020 [180-182]. We are invited by [NAME] [NAME] to accept that this letter on behalf of the Applicants acknowledged that there is a slither of land not included within the two plans. We do not think it goes as far as this but the letter clearly acknowledges that if there is a dispute as to the extent of the land to be enfranchised and any error in the notices then it is the County Court which is the correct forum to determine this issue. Ms [APPELLANT] accepted this in her submissions but stated the Applicant wished to avoid the costs.

89. Looking at the two plans we are asked to have regard to the position of the word “Ellingham” on both and the line drawn as to the land it is being sought to claim. Ms [APPELLANT] suggests that the print is too small to accurately see this.

90. We find on the plan for Block 1-20 at [18] the line drawn on the plan dissects the “A” of Ellingham. On the plan for Block 21-32 the line runs after the end of the “M” of Ellingham. It is clear taking the two plans that there is a strip of land which is not included within either plan which forms part of the Respondents current title.

91. It is suggested the plan [750] prepared for the Respondents, with the strip of land coloured yellow being the land excluded, represents these two notices.

12 92. This Tribunal is satisfied that there is a strip of land not included within either of the two plans annexed to the original notices seeking enfranchisement. In this Tribunals judgment it is only that land which is included in the two plans that the Applicant may enfranchise. We determine the plan at [750] and the land coloured red represents the land subject to the two notices and the strip of land coloured yellow was not included and the Respondent is not required to transfer the same.

Was agreement reached?

93. We have considered carefully the correspondence and submissions made.

94. We are satisfied it is possible for the premium only to be determined.

95. We have considered whether or not it can be said the parties did not know or did not reasonably know on what basis they were negotiating. At [130] the offer is made “in accordance with our rights under collective enfranchisement” by Ms [APPELLANT]. That offer is accepted by [NAME] [APPELLANT] on behalf of his client on 25th August 2020 [130] using following words:

“[NAME] I can confirm that I have [NAME] agreement at the agreed premium of £222,500 plus statutory recoverable costs.”

96. [NAME] [NAME] goes on then to ask for the solicitors details.

97. We are satisfied that both parties believed they were negotiating the premium for what the Applicant was entitled to enfranchise. We accept Ms [APPELLANT] thought that was the whole of the Respondents title and the Respondent believed it was not. In our determination the parties’ individual belief is immaterial. Both were agreeing the premium on the basis of what the Applicants were entitled to under the two respective notices. This is what Ms [APPELLANT] said in her email and this is what the Respondent agreed. In our judgment it was for Ms [APPELLANT] to have been clear if she was seeking something different. She could have spelt out that the offer was for the whole of title number SY429029, she did not do so.

98. On balance we find that Ms [APPELLANT] had seen the letter exhibited to [NAME]’s statement from [NAME] to Ms [APPELLANT] dated 28th August 2020 [747 and 748]. This letter records that what is being enfranchised is the Property as defined by the two notices and therefore the plans. At [135] is an email from [NAME] to Ms [APPELLANT] on 28th August 2020 referring to a letter being attached. Later on in the email trail [137] Ms [APPELLANT] picks [NAME] up on the date of the letter as he mistakenly referred to 30th August 2020.

13 99. We find that the agreement was reached by the exchange of emails on 25th August 2020. The later emails and letter simply confirm the position that an agreement was reached and that the agreement was on the basis of the two notices served.

100. In our judgment the premium was agreed by Ms [APPELLANT] and [NAME] for both notices in the total sum of £222,500.

101. Given the parties have agreed the premium this Tribunal no longer retains jurisdiction to determine the same.

102. At the request of the parties we do go on to determine the premium in the alternative if it is determined we were wrong to find that an agreement was reached.

Premium

103. At page [59] are set out the matters agreed by the two valuers:

Valuation date: 30th September 2019 Marriage value payable in respect of Flat 28

50% Hope of marriage value payable in respect of Flats 2, 3, 5, 10, 13 and 26

15% Deferment Rate in line with [NAME]

5%

104. The Tribunal heard evidence from [NAME] [APPELLANT] for the Applicant and [NAME] [APPELLANT] for the Respondent. We are satisfied that both gave their evidence having regard to their duty to the Tribunal. Overall we felt [NAME] [NAME] evidence was more considered. It appeared that [NAME] [NAME] had prepared his report in a short period of time and this was reflected by certain of the errors counsel for the Respondent raised with [NAME] [COUNSEL]. [NAME] [COUNSEL] acknowledged all such errors but it does colour the weight the Tribunal places upon his evidence.

105. Turning firstly to the freehold vacant possession values we note that if you do not include the comparables relied upon by [NAME] [NAME] outside the subject development the two valuers figures are very similar. We note [NAME] [NAME] makes certain deductions for improvements but this Tribunal is not persuaded the matters he refers to are strictly improvements being effectively repairs. Overall we prefer the methodology adopted by [NAME] [NAME] and determine the freehold vacant possession value for each type of flat as follows:

Studio apartments

£175,000 1 bed flats

£230,000 2 bed flats

£283,500

14 106. We turn next to the question of capitalisation rates. We have been referred to the decision of [NAME] and others CHI/43UG/OLR/2019/0012 by [NAME] [NAME] who raises various arguments and contends for significantly higher capitalisation rates referring to auction sales and a significantly earlier decision relating to the same property. He applies the rate in [NAME] and then discounts this something he himself says is unorthodox.

107. We are not satisfied that the earlier decision dating back to 2011 is relevant. [NAME] [NAME] also contends that Parliament may legislate on ground rents. Whilst this may be correct even by the date of hearing it has not done so and the date of valuation is significantly earlier.

108. [NAME] [NAME] seeks different rates dependant upon whether the ground rent is fixed, marginal stepped increases or doubling every 15 years. All of these rates are less than those determined in Melluish.

109. Looking at the totality of the evidence we determine that a capitalisation rate of 6.15% for all flats is appropriate having regard to all the evidence provided.

110. Turning to relativity [NAME] [NAME] refers to [COMPANY] ([COMPANY] v Teskonava [2020]UKUT 164 (LC) and states he should average the [NAME] and the [NAME] graph producing an average relativity of 81.44%.

111. [NAME] [NAME] disagrees and argues [NAME] should not be considered as the decision post dates the valuation date. [NAME] [NAME] invites us to include the RICS 2009 Greater London & England Graph in the average which results in an average of 84.05%.

112. We do not agree that we should ignore Deritend. That is a decision of the Upper Tribunal made before the matter came before this Tribunal. We believe it is right to consider the same and the comments it makes about the RICS 2009 graph which is now substantially out of date. We agree with the approach adopted by [NAME] [NAME] and determine the correct relativity is 81.44%.

113. This then leaves the question of development value. We note [NAME] [APPELLANT] had not inspected a loft. [NAME] had. Ms [APPELLANT] produced notes from various top floor [NAME] indicating that they would not pay to extend their demises into the loft. We note that [NAME] [NAME] invited us to ignore the same having not previously having been disclosed.

114. [NAME] [NAME] suggests that there is some “hope value” which he assesses at £20,000 being one third of the likely value he believes that a freeholder could obtain currently for such space. [NAME] [NAME] states there is no value.

115. We note no [NAME] has extended their demise to include this area. As [NAME] [NAME] notes it seems there is little demand. We agree.

15 We do not accept that an investor would pay anything for the potential hope value in these circumstances and so we attribute no extra value. [NAME] [NAME] had not inspected the lofts and it was clear whilst a number of transactions had taken place over the years by way of lease extensions no evidence was provided that any [NAME] would seek to include the loft space, let alone as to the costs proposed by [NAME] [NAME].

116. We make no findings as to “hope value” if the whole title was to be transferred. We reach this determination on the basis it is suggested that the Respondent would not have agreed to transfer the appurtenant property and it may be that other arguments may be raised by both parties. As a result it would be inappropriate for this Tribunal to determine the same without full argument being heard.

117. We determine the terms of the contract should be in those annexed hereto marked B.

Conclusion

118. The above sets out our determination.

119. We find that the premium was agreed at £222,500.

120. The Property to be enfranchised is that outlined in red on the plan at [750] of the bundle.

121. If we are wrong on the premium being agreed we have determined the premium to be payable by way of determining the constituent parts of any valuation. We direct the parties to produce a valuation inputting the figures agreed and those determined in this decision and to submit it for approval within 21 days of the date of this determination.

122. The Tribunal has not determined the reasonable costs and the parties are invited to try and agree the same. If they are unable to do so within 28 days of this decision either party may seek further directions from the Tribunal.

123. As a postscript we received an email from Ms [APPELLANT] inviting us to determine the premium payable separately for each notice. We have declined to do so as neither party addressed the Tribunal on this basis and it would be inappropriate for us to do so.

© CROWN COPYRIGHT

Rev. 1-2017

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

:

CHI/43UM/OCE/2020/0005/6

Property

:

Blocks 1-20 & 21-32, 7,9,11,13 [ADDRESS] [POSTCODE]

Applicant: [redacted]

:

[NAME] [APPELLANT]

Respondents

:

[redacted]

:

[NAME] [COUNSEL], counsel instructed by [COUNSEL] LLP

Type of Application

:

Tribunal Member(s)

:

Judge [NAME] of hearing

Date of determination

:

:

10th and 12th February 2020

13th April 2021 and 8th May 2021

SUPPLEMENTARY DECISION

2

Background

2. Following a [NAME] remote hearing over two days the Tribunal issued a decision dated 13th April 2021. That determination included certain findings as to the constituent parts of the method of valuation for a collective enfranchisement. The parties were invited to input such figures into their valuation calculations and to agree the final premium.

3. The parties valuers who gave expert evidence have submitted a document signed by both and dated 2nd May 2021 agreeing a valuation of £213,660.

Determination

4. This determination should be read in conjunction with the earlier decision dated 13th April 2021.

5. The Tribunal approves the valuation figure of £213,660 produced and agreed by the expert witness valuers. This is the figure which the Tribunal has determined is the premium payable under the Leasehold Reform Housing and Urban Development Act 1993.

© CROWN COPYRIGHT

Rev. 1-2017

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

:

CHI/43UM/OCE/2020/0005/6

Property

:

Blocks 1-20 & 21-32, 7,9,11,13 [ADDRESS] [POSTCODE]

Applicants

:

[redacted]

:

[NAME] [APPELLANT]

Respondent: [redacted]

:

[NAME] [COUNSEL], counsel instructed by [COMPANY]

:

Tribunal Member(s)

:

Judge [NAME] of hearing

Date of determination

Date of Rule 13 costs determination

:

:

:

10th and 12th February 2020

13th April 2021

25th August 2021

DETERMINATION

2

Background

1. Two applications were made under section 24(1) of the Leasehold Reform Housing and Urban Development Act 1993 by the Applicant as the nominee purchaser seeking to collectively enfranchise the freehold of the Property. The Respondent was the same in respect of each notice. The two matters were joined together.

2. The hearing took place by [NAME]. The hearing commenced on 10th February 2021 but could not be concluded in one day. The hearing resumed, again by [NAME] with the same representatives on 12th February 2021. A decision was issued dated 13th April 2021.

3. By application dated 11th May 2021 the Respondent seeks an Order pursuant to Rule 13 of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 for an order that the Applicants should pay the costs incurred by the Respondent. The basis of the application is that the Tribunal determined the premium had been agreed by the parties prior to the hearing taking place. The Respondent suggests given this finding the Applicants’ conduct is such that an Order for costs should be made. Directions were issued on 18th May 2021 for the determination of these costs.

4. The parties were reminded that the case of [ADDRESS] Company (1985) [COMPANY] v Alexander [2016] UKUT 290 (LC) remains the leading authority on the test which this Tribunal should apply in considering whether or not to make an order for costs pursuant to Rule 13.

Determination

5. In reaching its determination the Tribunal has had regard to all of the documents filed by the parties in accordance with the directions issued.

6. The directions provided that this matter was to be determined on the papers unless either party requested a hearing. No hearing has been requested by either party. We are satisfied that the matter is appropriate to determine on the papers.

7. We have also had regard to our findings and the decision made in the substantive applications.

8. We remind ourselves that before making any Order we must be satisfied that the way that the Applicants conducted the proceedings was unreasonable. This is not the same as saying that we found in favour of the Respondent’s arguments. Likewise we remind all that the

3 usual rule in such proceedings is that each party bear their own costs, the parties should approach proceedings on that basis and should not have an expectation that costs will be recovered.

9. The Respondent’s argument is that the Applicants acted unreasonably in pursuing these proceedings after an agreement had been reached. The Applicants say to do so was not unreasonable.

10. Further the Respondent contends as a separate issue that the Applicants included within the bundle substantial amounts of documents which had not been disclosed in accordance with the directions issued in the substantive proceedings. The inclusion of these documents incurred the Respondent’s representatives additional work and such conduct was unreasonable.

11. The Applicants’ representative filed a reply to the Application dated 18th June 2021 (this included their submissions in respect of the separate statutory costs determination). The submissions refer to the Applicants being litigants in person and of limited means.

12. Whilst plainly Ms [APPELLANT] was a litigant in person for the proceedings in terms of her presentation of the case, we note that throughout the collective enfranchisement claim the Applicants have had the benefit of legal and surveying advice. We were referred to the same within the main proceedings.

13. The Applicant refers to having taken advice from a barrister who drafted a letter which was sent by [NAME]. It was this letter which referred to the Applicants contemplating County Court proceedings. The Applicants now contend they believed the Tribunal would determine all matters.

14. On balance we do not accept the Applicants’ submissions in this regard. It was on their instructions that a letter was sent referring to the County Court having jurisdiction to resolve any dispute as to what land was to be acquired. In her evidence at the substantive hearings Ms [APPELLANT] explained that the Applicants had not applied to the County Court to avoid the costs of such proceedings. We find that the Applicants knew or ought to have known it was for the County Court to amend the plans attached to the two original notices and the Tribunal could only proceed on the basis of the actual notices served. We found as a matter of fact in the substantive proceedings that the two notices did not include all of the freehold.

15. We found that an agreement as to premium had been reached at the end of August 2020. All steps by the Applicants up until that point cannot be faulted, they had quite properly made application to the Tribunal and any and all costs incurred by the Respondent (including [NAME] fees and legal expenses) are quite properly to be paid by the Respondent. It was for the Respondent to determine what

4 representation they required on the basis that the starting point is they will be responsible for their own costs.

16. We were satisfied that this was a binding agreement for the reasons set out in our original decision. We do not repeat those but rely upon that decision.

17. It is correct to say that the Respondent raised the issue of there being agreement prior to and at the telephone case management hearing on 18th November 2020. From at least this point in time the Applicants knew or ought to have known it was the Respondent’s case that the premium had been determined by agreement on 25th August 2020.

18. We are satisfied that Ms [APPELLANT] had taken legal advice as to her position. Her reply document to this application sets out the steps she took which included a consultation with a barrister and instructing solicitors to correspond with the Respondent.

19. It was the case that the Applicants choose to proceed with the Tribunal application notwithstanding the agreement. We have considered carefully whether in our determination this amounts to unreasonable conduct. Whilst we accept greater leeway must be afforded to a litigant in person as we have found the Applicants have had the benefit of legal advice from solicitors and barristers. The Applicants themselves instructed [NAME] to send a letter dated 2nd November 2020 setting out the correct course of action which the Applicants should have followed if they were unhappy with what land was to be transferred. Despite this they choose not to do so.

20. In this case agreement was reached as to the premium payable. It is clear from the correspondence (and the earlier findings we made) that both parties considered that to be a binding agreement. In our determination seeking then to re-open the terms of the agreement does amount to unreasonable conduct. We accept some time may be required for legal advice and reflection given the circumstances of this case, but in our judgment by the end of 2020 the Applicants should have accepted the premium had been agreed.

21. We note that by the date of the hearing the form of transfer was not agreed. We accept that it certainly appears neither party had given much time to this issue. At the substantive hearing, relatively little time was given to this matter.

22. At the substantive hearing the Applicants sought to persuade the Tribunal that we had powers to determine that the land to be enfranchised. The Applicant asserted we could determine the land to be enfranchised was the whole of the freehold and not as set out in the plans served on or behalf of the Applicants with the two initial notices. Again, we found this argument to be misconceived. This was the very issue raised in the letter of [NAME] referred to above which suggested an application to the County Court. Ms [APPELLANT] told the

5 Tribunal at the substantive hearing that she had not made an application to the County Court due to the costs in so doing.

23. The Applicants suggest much time was spent on determining “development value” being a matter we did not accept the Respondent’s experts’ evidence. We do not accept that substantial time was spent on this aspect and we are satisfied it was a reasonable matter for the expert to raise irrespective of our findings. To be clear the conduct of the Respondent in this regard cannot be said to be unreasonable.

24. We determine that the conduct of the Applicants in continuing to argue that the premium was not agreed after January 2021 was unreasonable. Whilst we found the agreement itself was reached in August 2020 we accept it was reasonable for the Applicants to continue the proceedings in respect of the premium up to the end of 2020, during which time the issue over the land to be transferred was clarified, the Applicant took advice and had the benefit of having the Respondent’s position confirmed at the case management hearing. Thereafter having taken advice in our judgment the Applicants should have accepted the Premium had been determined for the land which they sought to enfranchise under the two notices served. It may have been open to them to apply to the County Court to vary the plans but the Applicants did not do so.

25. We make clear that the Tribunal is conscious that it is in accordance with the overriding objective to uphold agreements parties have reached. The Tribunal encourages negotiation and once agreement is reached parties must accept that such agreements are binding.

26. Having determined that the conduct was unreasonable it is now for us to consider whether or not an order for costs should be made and if so the amount.

27. We are satisfied that an order should be made. Plainly the Respondent had to prepare the case on the basis that the premium payable was in dispute. The Respondent instructed an expert valuer and also looked to instruct specialist counsel to represent them at a hearing which took place over two separate days and heard expert evidence from both sides. To do so was entirely reasonable conduct and such costs were incurred due to the Applicants’ unreasonable conduct in suggesting there was no agreement as to the premium.

28. We comment here on the documents produced by the Applicants which the Respondent say are not in accordance with the directions. We accept that such documents should have been served at the date given for the Applicants to serve witness evidence. However, it may be said the directions were unclear in this regard. Such documents were not relied upon by the Tribunal in determining any issue at the substantive hearing. They demonstrated the ill feeling that existed between Ms [APPELLANT] and the Respondent and its director [NAME]. We are satisfied that if served at the correct time the Respondent and its advisers would

6 still have had to consider the same. Any experienced adviser would note that they were unlikely to impact on matters to be determined by the Tribunal.

29. It is then a question of considering the amount of any order. We have looked at the schedule produced and comment that we are of course determining this on a summary basis. We are satisfied that a hearing may still have been required to finalise the terms of any transfer.

30. The total costs claimed are approximately:

[NAME] fees

£6,000 Counsel

£8,400 Solicitors

£15,820

Total

£30,220

31. In our judgment the Applicants should pay the sum of £10,000 as costs pursuant to Rule 13.

32. In determining the amount, we have had regard to the invoices and costs breakdowns supplied by the Respondent. We have taken account of the [NAME]’ fee and payment to counsel for the second day of hearing together with the solicitors costs generally and determine that this amount fairly represents in our judgment the reasonable costs thrown away as a result of the Applicants’ unreasonable conduct.

RIGHTS OF APPEAL

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application by email to [EMAIL] to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

3. If the person wishing to appeal does not comply with the 28 day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

4. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.

7