First Floor, 36 Norlington Road, London E10 6JZ: LON/00BH/OLR/2018/0502 LON/00BH/OLR/2018/0502

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case No LON/00BH/OLR/2018/0502

Between

Martin SwiftApplicant

Mark Wagstaff Determination of terms of leaseRespondent

Before

Mr N Martindale FRICS

Cavendish Legal Group for the Applicant

Date 22 May 2018

Property: 36 Norlington Road London E10 6JZ

Type of application: extension (missing landlord)

DECISION

[1]The premium to be paid by the applicants for the lease extension at First Floor Maisonette, 36 Norlington Road, London E10 6JZ, registered at HM Land registry under title number EGL49983 (the “Property”) is £39,200. The draft deed of surrender and re-grant attached as an appendix to the applicants bundle, is approved. Introduction

[2]This is an application made under 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 and the terms of an acquisition of an extension to the leasehold interest in the Property. The relevant legal provisions are set out in Appendix to this decision.

[3]The Property is a first floor maisonette, being the upper level of a two storey building, itself formerly a house, in a terrace. The upper floor constitutes a separate dwelling. The whole Property dates from the 1890’s, the flat conversion from the 1970’s.

[4]The Applicant, Martin Swift is the long leaseholder of the Property holds his interest under the terms of a lease dated 11 June 1976 registered under title number EGL49983. That lease was granted by Alfred Hood to David Hood and Janet Hood, for a term of 99 years from 11 June 1976. The lease reserves a rising ground rent: The first 25 years, £25 pa; the next 25 years £50 pa; the next 25 years £75 pa; the remainder £100 pa. The residual term of the lease is now vested in the applicant, registered as leasehold proprietor on 29 January 1988.

[5]The registered freehold proprietor of the Property is the respondent, Mark Wagstaff. He was registered as such under title number EGL18654 on 14 December 1987.

[6]By order made by District Judge Manners on 3 April 2018 and on the court being satisfied that the respondent could not be found, the respondent’s interest in the subject Property was vested in the applicants in accordance with section 50 of the Act.

[7]It was further ordered that service by the applicants of a notice under section 49 of the Act was dispensed with and that the proceedings were to be transferred to this tribunal for a determination of the terms of the new lease, from the respondents.

[8]The Tribunal considered the issue on the papers submitted by the applicants, without a hearing, in accordance with directions issued on 9 April 2018. The case was to be determined in the week commencing 21 May 2018.

[9]The Tribunal’s jurisdiction is derived from the order made by the court on 3 April 2018. The statutory basis of valuation

[10]Part 2, Schedule 13 to the Act provides that the price to be paid by the leaseholder, the applicant for the new leasehold interest where there is no intermediary head leaseholder, applies here.

[11]The premium payable in respect of the grant of a new lease is the total of:(a) the diminution in value of the landlord’s interest in the tenant’s flat as determined in accordance with paragraph 3,

(b) the landlord’s share of the marriage value as determined in accordance with paragraph 4, and

[12]The diminution is: 3(1) The diminution in value of the landlord’s interest is the difference between(a) the value of the landlord’s interest in the tenant’s flat prior to the grant of the new lease; and

(b) the value of his interest in the flat once the new lease is granted.

[13]Paragraph 4 of the Schedule, as amended, provides that the freeholder's share of the marriage value is to be 50%, and that any marriage value is to be ignored where the unexpired term of the lease exceeds eighty years at the valuation date. Here it is included as the unexpired term is less than eighty years.

[14]Paragraph 5 of the Schedule provides for the payment of compensation for other loss resulting from the enfranchisement. The evidence before the Tribunal

[15]The applicants have provided a valuation report dated 25 April 2018 by Tim Henson of Messrs Clarke Hillyer Chartered Surveyors (“Valuation Report”).

[16]Having considered the contents of the Valuation Report and the opinions expressed by the valuer, the Tribunal is broadly satisfied that the method adopted is appropriate to determine the premium for the new lease for the Property. The Tribunal accepts the description of the Property and its location as stated.

[17]A photograph of the exterior of the Property was included in the Valuation Report. The Tribunal did not consider it necessary or proportionate to carry out an inspection of the Property. Valuation

[18]The First Floor Maisonette at 36 Norlington Road E10 6JZ, consists of stairs from ground level, bedroom, living room, kitchen and bathroom/WC. There is no access to the rear garden. The loft space is not included.

[19]Entry to the two flats is via a shared ground floor entrance door and small front garden.

[20]It is stated in the Valuation Report that the flat has replacement timber windows and a renewed slate roof and modern bathroom fittings and under the heading “Condition and Improvements”, but appears to make no specific deduction in the valuation for any additional value that these might add, if they are indeed improvements.

[21]The valuation date prescribed by section 27(1) of the Act is the date of the applicants’ application to the court namely 4 July 2017. The unexpired residue of the lease for the maisonette is 57.47 years.

[22]Mr Henson’s assessment of the market value of both flats is based on evidence of completed sales of four comparable and one further comparable pending completion. All have long leases of well over 125 years unexpired, are within a quarter of a mile, and mostly ground floor with the benefit of the rear garden. Making small adjustments for time between the sale dates, lack of garden here, and immediate surroundings produced a series of values between £311,000 and £330,000, averaging £320,640. Mr Henson adopts a long leasehold value for the Property of £320,000.

[23]The Tribunal is satisfied with the relevance and detail of all five comparable property sales provided in the Valuation Report. The Tribunal accepts the valuer’s analysis and assessment of each in the assessment of the value of new long lease of the Property.

[24]The Tribunal notes and accepts the 1% adjustment by Mr Henson in uplifting the long lease value to its notional freehold value.

[25]Mr Henson having considered the RICS published graphs of relativity, which for 57.47 years show a range of 81.48% to 87.47% and adopts the average of 82.65% excluding the SE Leasehold date graph for property outside London and duly applies this percentage relativity to each of the virtual freehold value of the Property.

[26]Mr Henson also considers that more consideration needs to be given to the impact of the ‘no At World’. While he is unable to refer to a specific authority for this he refers to an deduction of 2-3% on this to reflect that. He regards the resulting figure as being inle with the Gerald Ev 2015 graph which shows 79.48% for this unexpired term. From the foregoing he adopts a ‘blend of relativity outcomes at 81%.’ The Tribunal agrees with the need to reflect the absence of rights of extension as assumed under the Act and accepts the adjustment to 81% relativity here.

[27]The diminution in the value of the landlord's interest in the tenants’ maisonette is represented first by the capitalised value of the grounds rent receivable under their leases. That small income stream is capitalised by Mr Henson at 7%, which the Tribunal accepts is appropriate in this case owing to the low, rising but still modest ground rents.

[28]Next, the effect of the lease extension will deprive the landlord of the property for a further 90 years in addition to the current unexpired term. The present value of that delayed reversion is determined by applying a deferment rate to the freehold value of the flat. The deferment rate appropriate for leasehold flats in Central London was authoritatively determined to be 5% in the case of Earl Cadogan v Sportelli (2006) LRA/50/2005. Mr Henson also adopts the Sportelli deferment rate of 5% which the Tribunal accepts.

[29]The marriage value is to be shared equally between the parties, as required by the Act.

[30]The Tribunal accepts the valuation for the property, as produced by Mr Henson and in particular his final opinion of value of £39,200 as expressed in his Valuation Report. The Tribunal has therefore not produced its own valuation.

[31]The premium to be paid by the applicant for the new lease of the Property is therefore £39,200. Name: Neil Martindale Date: 22 May 2018