46b Moyser Road London SW16 6RW: LON/00BJ/OLR/2018/0776 LON/00BJ/OLR/2018/0776
FIRST-TIER TRIBUNAL
PROPERTY CHAMBER (RESIDENTIAL PROPERTY)
Case No LON/00BJ/OLR/2018/0776Date 31 October 2018
[1]This is an application made by the applicant pursuant to section 48 (1) Leasehold Reform Housing and Urban Development Act 1993 (“the 1993 Act”) for a determination of the premium to be paid for a lease extension, or other terms of acquisition of the lease of 46b Moyser Road LondonSW16 6RW (the “Property”).[2]By a notice of claim dated 30 November 2017, served pursuant to Section 42 of the Act, the applicant exercised the right to claim a new lease of the property and proposed to pay a premium of £20,706 for the new lease.[3]On 7 February 2018 the respondent freeholder served a counter-notice admitting the validity of the claim and counter-proposed a premium of £55,461 for the new lease.[4]On 8 June 2018 the applicant applied to the tribunal for a determination of the premium and terms of acquisition. The issues Matters agreed[5]The following matters were agreed(i) The subject property is a two bedroom conversion flat on the first floor of a two storey former single dwelling house built circa 1910. The property comprises 702 sq.ft. There is no outside space or parking provision.(ii) The valuation date: 30 November 2017(iii) Details of the tenants’ leasehold interest: (a) Date of lease: 21 February 1986 (b) Term of lease: 99 years from 18 June 1985 (c) Ground rent: £50 p.a. increasing by £50 p.a. every 33 years (d) Unexpired term at valuation date: 66.55 years Capitalisation rate: 6.5% Deferment rate: 5%[8]Adjustment to long leasehold value to assess freehold vacant possession value: 1% Freehold value: £413,177 Extended lease value: £409,045 Matters not agreed[11]The following matters were not agreed(i) Relativity; and(ii) The premium payable The hearing The hearing took place on 23 October 2018.[13]The applicant relied upon the expert report and valuation of Mr Robson MRICS dated 9 October 2018 and the respondent relied upon the expert report and valuation of Mr Dunsin FRICS dated 9 October 2018.[14]Neither party asked the tribunal to inspect the property and the tribunal did not consider it necessary to carry out a physical inspection to make its determination. The valuation reports[15]Mr Robson and Mr Dunsin agreed that there was no appropriate transaction evidence for the existing lease value, which is the preferred method of calculating relativity following the decision in Mundy v Sloan Stanley (“Mundy”).[16]Mr Robson therefore based his value on a relativity of 88.58% which he obtained by following the approach adopted in Patel & Patel c Cheema & Cheema LON/00az/OLR/2017/1393 (“Patel”). In Patel the 2002 Savills graph was compared to the Savills 2016 (enfranchisable) graph and the percentage reduction applied to the average of the five graphs under Section 2 of the RICS Research-Leasehold Reform: Graphs of Relativity. He submitted that while based on Prime Central London (PCL) data he considered the approach in Patel to be a fair adjustment to reflect modern relativities from his experience in the south and south west Greater London market. He cross referenced this relativity to his preferred Section 2 graph (that of Nesbitt & Co) whose graph showed a relativity of 88.93% and to a relativity of 88.04%, achieved if he adopted the approach taken in Hong Hue v Cherry & Cherry [2015] UKUT 0651 (LC) (“Hong”). In Hong only three of the five Section 2 graphs were used along with the Cluttons flat graph (which is a PCL graph), with a 2/3 weighting made to the average of the three selected Section 2 graphs and 1/3 to the Cluttons flat graph.[17]Mr Robson accepted that there was difficulty in using the Section 2 graphs; Beckitt & Kay because it is mortgage based, South East Leasehold because its information was primarily taken from south east London and contained both pre- and post Act figures; Austin Gray and Andrew Pridell Associates because they were Brighton based. His preferred one of the five was Nesbitt & Co, submitting that the figures it produced most closely accorded with his experience in the area of the Property. In using the 2016 Savills graph (the tribunal note that this is the same graph as that to which Mr Dunsin refers to as the 2015 Savills graph) Mr Robson did not believe it was yet widely used in the Greater London market but that it was not inconsistent to use it as a tool where it matched his experience. The only way he could see it being usefully employed in Greater London was in the form in which it was weighted in the Patel case.[18]Mr Dunsin submitted that the appropriate relativity to be adopted was 83.29%. He took as his starting point the Savills 2015 enfranchisable relativity of 86.12% for a lease term of 66.55 years. For his use of the Savills 2015 enfranchisable graph relied on the decision in Reiss v Ironhawk [2018] UKUT 0311 (LC). To the relativity of 86.12% Mr Dunsin then applied a 3.29% deduction for “no Act rights”. The 3.29% he took from the value of Act rights shown in the Myleasehold graphs, which figure is calculated by taking the difference between the Savills 2002 figure and the Gerald Eve 2009 figure and calculating this difference as a percentage of the Savills 2002 figure. In support of his approach Mr Dunsin referred the tribunal to the statement on Mundy (at paragraph 169) that one method of determining relativity was to use a graph to determine the relative value of an existing lease with Act rights and then to make a deduction to reflect the absence of those rights on the statutory hypothesis. In his submission the Gerald Eve graph was the most reliable, he cited the decisions in Denholm v Stobbs (“Denholm”), and Mallory v Orchidbase Limited (“Mallory”).[19]Mr Dunsin disregarded the five Section 2 graphs entirely, relying on the fact that they had been disregarded in the 29 Windermere Court case LON/00AE/OLR/2017/0433. On being questioned by Mr Robson he submitted that there was no distinction between relativity in prime central London and the remainder of London. Reasons for the tribunal’s determination[20]The tribunal had difficulty in accepting either of the valuers’ approaches in its entirety.[21]While appreciating that it might be a pragmatic solution to do so, the tribunal has seen no evidence to substantiate why the Patel weighting should be adopted in this case. Mr Robson has made no adjustment for the no Act world and the tribunal consider some adjustment to reflect this is necessary.[22]The tribunal do not agree with Mr Dunsin that there is no difference in relativity between prime central London and Greater London. There is a difference and the tribunal need to make an adjustment to the relativity figure to account for this.[23]The tribunal is mindful that Mr Dunsin referred to the Denholm case in support of his use of the Gerald Eve graph but the tribunal note that this case involved a property in W11, and agree with Mr Robson that this is “prime London” if not Prime central London.[24]The tribunal is further mindful that Mr Dunsin took a recent graph (Savills 2015) but adjusted it by reference to a percentage calculated by using the older graphs[25]The tribunal does not agree with Mr Dunsin’s interpretation of the Reiss case as pointing to the Savills’ 2015 enfranchisable graph being the most reliable method of valuation in all cases, but consider that it may be a useful starting point for considering the appropriate relativity in this case. It then considers it necessary to make some adjustment for the property not being in prime central London and to have regard to the “no Act world.” It is difficult to quantify these in the absence of comparable evidence, but in this case the tribunal consider that there is no reason for it not to assume that the deduction for “no Act” rights is counter-balanced by a need to reflect that the location of the property which is not prime central London.[26]Accordingly the tribunal have adopted a relativity of 81.6%. The valuation setting out the tribunal’s calculations is set out in the Appendix Name: Judge Pittaway Date: 31 October 2018 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).