Leasehold Valuation Tribunal Decisions
As I advised in my last bulletin, I’ve been awaiting a Leasehold Valuation Tribunal decision in a case where I represented the Freeholders and the issues to be decided were:
- The extent of the Notice of Claim
On ‘deferment’, the LVT decided that 5.25% was appropriate for a smart, well managed building in Battersea having four flats only and being managed collectively by the leaseholder claimants. The decision appeared to echo a view that freeholders now had to prove why the additional 0.25% on deferment should not apply. Perhaps, the most recent Supreme Court decision in Daejan v Benson (made on 6 March 2013, the same day as the LVT decision) will alter this approach? Time will tell.
On ‘relativity’ (the relative value of a lease when compared with the share of freehold value) the LVT decided on a figure very close to the average of all LVT decisions. This is four percentage points higher than that which would be applied to a flat in prime central London, which is less than four miles from the subject property. The LVT decided that a garden ground, which was included in a lease but was not included in the Notice of Claim, should be added to the claim.
On another matter, where I represented the claimants, the LVT were asked to settle the amount of discount to be applied in respect of ’93 Act rights’.
I quote from James Wilson MRICS (ALEP member – see below) in the RICS Property Journal – April/May 2013:
“The no Act world
When valuing the existing lease to calculate the marriage value, the statutory assumption is that the tenant has no right to acquire either the freehold interest or a new lease. That is not to say that there is no Act (the legislation giving tenants rights either to enfranchise or to take a new lease) it is that those rights are not available to the tenant. They are, in effect, sitting in a “no-Act world” bubble.
The unexpired term was 49 years. The LVT decided that the amount of discount to be applied to an existing lease value of a flat in Twickenham, with a maximum value of £243,000, should be 8½%.
The LVT had, in the course of their discussions, agreed that the adjusted current lease value, with ’93 Act rights’, was £165,240 or a ‘relativity’ of 68%. This was just two points below the lowest recognised graph line published in the RICS compendium of graphical indices for a 49 year unexpired term at 70%. After applying an 8½% discount, the existing lease value became £152,300, which represented ‘relativity’ between finally adjusted existing lease value and share of freehold value of 62.67%!
In the Upper Tribunal (UT) [The Earl of Cadogan (and others) v Cadogan Square Ltd – 2011 UKUT 154 (LC)] often referred to as ‘36 Cadogan Square’, it was decided that by using two graphs, one of which was compiled prior to the 1993 Act and one of which was published in 2002, it should be possible, by way of computed formulae, to arrive at an appropriate percentage discount for 1993 Act rights for prime central London – Cadogan Square.
In arriving at their 8½% discount, the LVT did not mention ‘36 Cadogan Square’ but the formula applied by the UT in ‘36 Cadogan Square’, if applied to this flat in Twickenham, came to an 8½% discount. The head lessees were seeking 10%.
This decision was costly for the claimants but it still represented considerable savings from the figure being demanded by the Head Lessee. However, in view of the overall sums involved it was not a matter which could be appealed. All these decisions would suggest that professional advice is essential prior to seeking a lease extension or defending one and/or enfranchisements.
Michael Tibbatts MRICS is a member of the Association of Leasehold Enfranchisement Practitioners (ALEP)
ALEP is a not-for-profit association that brings together barristers, solicitors, surveyors and enfranchisement intermediaries and managing agents working in the residential leasehold sector. ALEP promotes best practice by vetting members to ensure they have significant expertise in leasehold enfranchisement. Membership of ALEP acts as a badge of assurance so that flat owners and freeholders can be confident that they are employing professionals with the right level of experience in handling potentially complex transactions.
The market for lease valuation and extensions is currently very busy. If you would like any examples of readers’ extending their leasehold or buying a freehold, in order to make their property more valuable please telephone ALEP on 0845 225 2277 or visit Association of Leasehold Enfranchisement Practitioners website at www.alep.org.uk
ALEP’s 150 members and other followers are also on Twitter at: twitter.com/alepofficial