P H Clarke FRICSDate 25 November 2002Property: 1-24 & 31-48 Imber Close, Ember Lane, Esher, SurreyCatchwords: LEASEHOLD ENFRANCHISEMENT – collective enfranchisement – valuation – application of 92% ratio between value of existing leases and extended leases – value of garages – rounding of figures in valuation by LVT – appeals dismissed – Leasehold Reform, Housing and Urban Development Act 1993
[1]These are two appeals by the landlords of flats in Esher against the decision of a leasehold valuation tribunal fixing the price on collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993.[2]The nominee purchasers have not responded to these appeals. The appellant landlords have agreed that they be determined without an oral hearing under rule 27 of the Lands Tribunal Rules 1996. I have received from the appellants’ solicitors, Wallace and Partners, a statement of case and a hearing bundle comprising the decision of the LVT, the lease of flat 44 (with garage) and copy correspondence. Facts[3]These appeals concern three purpose-built blocks of flats and garages known as Imber Close, Ember Lane situated about 1½ miles from the centre of Esher in Surrey. The freehold is held by the appellants. The flats are let on long leases expiring in September 2074 with the exception of flat 30 which expires in September 2121. The ground rents range from £30 to £100 per annum with reviews in 2008 and 2041 (except flat 30 which has reviews in 2021, 2046, 2071 and 2096).[4]The applicants to the LVT were Imber Mansions Limited, the nominee purchasers for 42 of the 44 flats let to qualifying tenants. The application was made on 14 May 2001, a hearing was held on 25 March 2002 and by a decision dated 12 June 2002 a leasehold valuation tribunal of the Southern Rent Assessment Panel determined the price to be paid by the nominee purchasers at £346,300. This decision related to a price for all the flats (nos.1- 48) but the LVT’s valuation was in three parts, £190,162 for nos.1-24, £33,361 for nos.25-30 and £122,771 for nos.31-48. At the hearing both parties were represented by counsel and called expert evidence. On 3 July 2002 the appellants’ solicitors wrote to the Chairman of the Southern Rent Assessment Panel stating that the tribunal does not appear to have correctly calculated the long lease values or has wrongly rounded down those values, and requested that the necessary corrections be made. On 30 July the Panel Secretary replied on behalf of the Chairman stating that no errors had been made and declined to change the tribunal’s decision.[5]On 10 July 2002 the appellants’ solicitors lodged appeals to this Tribunal in respect of flats 31-48 (LRA/38/02) and 1-24 (LRA/39/02) on the grounds that “the figure determined by the Tribunal is not in accordance with the Tribunal’s determination that the ratio of existing lease value to value of long lease with share in freehold is 92%” No appeal has been lodged in respect of the determination relating to flats 25-30. The nominee purchasers have not responded to these appeals. On 6 September 2002 the appeals were directed to be heard under the simplified procedure (rule 28). This was changed on 16 November 2002 to the written representations procedure (rule 27) with the agreement of the appellants. On 23 September 2002 the appeals were directed to be heard together. 2 Appellants’ case[6]The appeals relate to the manner in which the LVT calculated the long lease values of the flats let to participating tenants. Some of the flats include a garage in the demise. Before the LVT the parties agreed the values of the flats with an unexpired term of 73 years. The issues to be decided by the LVT were:-(i) the value to be attributed to the garages (determined at £8,000 by the tribunal); and(ii) the ratio of existing lease value to the value of a long lease (determined by the tribunal to be 92%).[7]The appellants contend that the tribunal incorrectly applied its determination of the ratio in two ways. First, in respect of the flats with a garage the tribunal only applied the 92% to the value of the flat. Thus, although the tribunal found the value of a 73 year lease of a flat and garage to be £165,500 (i.e. £157,500 plus £8,000) it took the long lease value to be £179,195.65 (£171,195.65 plus £8,000). Application of the 92% ratio to a short lease value of £165,500 produces a long lease value of £179,891.30. Second, having determined a ratio of 92%, the tribunal should not have rounded the resultant figures. Alternatively, it should have rounded the total of the long lease values rather the figures for individual flats. The appellants state that the tribunal’s figures understate the total long lease value by some £12,108.70 with a consequent understatement of the freeholders’ marriage value by £6,054.35. Decision[8]The appellants have not lodged any expert evidence in support of their appeals but rely on representations by their solicitors. These appeals cannot therefore be decided on the basis of the evidence before this Tribunal (a re-hearing) but must proceed as a review of the LVT’s decision.[9]In paragraph 4(v) of that decision the LVT record that “the open market value of the two-bedroom flats is agreed at £157,500 and of three-bedroom flats at £177,500. To these figures must be added the value of garages for those flats having garages.” In paragraph 5 the tribunal set out the issues:- “i) The value of a garage at Imber Close (whether the lease is for 73 years or longer). The freeholder’s contention was that the value was £16,250, whereas the nominee purchaser’s contention was that it was £8,000. ii) The difference in value between a 73-year leasehold interest and a 163-year leasehold interest. The freeholder’s contention was that the current lease value represented 88% of the 163-year lease value whereas the nominee purchaser’s position was that 96% was the correct percentage. 3 iii) The additional value of flats if held on a 163-years lease with a share of the freehold as opposed to a 163-year lease without share of the freehold. The freeholder’s position was that the additional value was 3% whereas the nominee purchaser’s contention was that no value was to be attached.” I note that both parties appear to have proceeded on the assumption that the value of a garage is the same “whether the lease is for 73 years or longer.”[10]After summarising the evidence the LVT reached the following decision (paragraph 17):- “For the reasons we have given, we have decided:-(i) That the value of a garage included within the demise of a flat on the estate is £8,000.(ii) The ratio of existing lease value to value of long lease with share in freehold is 92%.(iii) By combining our rulings on the two disputed issues with the points already agreed between the parties and adopted by us, we have arrived at our valuation shown in Schedule 2 and have decided that £346,300 is the price to be paid for the acquisition of the freehold interest by the nominee purchaser.”[11]There are no appeals regarding the £8,000 garage value and the 92% ratio. It is the application of these decisions in the tribunal’s valuations which the appellants say is wrong.[12]I look first at the inclusion in the LVT’s valuations of the garage value of £8,000 and the application of the 92% ratio. The tribunal’s approach is explained in their letter to Wallace and Partners dated 30 July 2002:- “The two and three bedroom flats with garages have been valued as follows:- Two bed flat - £157,500 Ratio of existing lease to long lease value with share of freehold – 92% ∴ uplift to £171,195.65 + Garage £ 8,000.00 Total £179,195.00 Say £179,000.00 Three bed flat - £177,500 Ratio of existing lease to long lease value With share of freehold – 92% ∴uplift to £192,934.78 + Garage £ 8,000.00 Total £200,934.78 Say £201,000.00 4 The Tribunal were of the opinion that there was no differential between the value of a garage for a flat with an existing lease on the one hand or a flat with a long lease and share of the freehold on the other hand. Therefore the figure of £8,000 was applied for both valuations, with no uplift added. Wallace & Partners’ figures suggest that they have applied uplift based on the 92% ratio. This accounts for £9,053.48 of the difference between their figures and the Tribunal’s figures. Since our decision in this regard was a deliberate decision on our part, it would not be appropriate to amend our decision under the slip rule, even if we were inclined to do so.” Wallace and Partners, in their representations to this Tribunal, say that the 92% ratio should have been applied to the combined value of flat and garage.[13]I cannot find any error by the LVT in its approach as outlined above. It appears to have been the approach adopted by the parties at the hearing as evidenced by paragraph 5(i) of the LVT’s decision, where it is recorded that the issue was “the value of a garage at Imber Close (whether the lease is for 73 years or longer)” (my emphasis). Even if there was not a common approach, the LVT’s application of the garage value and 92% ratio in their valuations was, in my judgment, a realistic one and certainly an approach it could justifiably have taken. In the absence of expert evidence showing that it was wrong, I cannot find the tribunal to have been in error. This ground of appeal fails.[14]The second objection to the LVT’s valuations relates to rounding. The letter of 30 July 2002 to Wallace and Partners states that “the Tribunal has indeed, in accordance with what it considers to be normal valuation procedures rounded off the figures to the nearest £1,000.” The appellants’ statement of case says that the LVT should not have rounded the resultant figures for each flat after calculating the 92% ratio or it should have rounded the total of the long lease values rather than the figures for individual flats.[15]The rounding of figures is an integral part of valuation, whether it is individual figures, sub-totals or totals. In my judgment the LVT were justified in rounding the individual flat values to the nearest £1,000 when applying the 92% ratio. I cannot find that they were wrong in not rounding the totals rather than the individual figures. Both forms of rounding are permissible. This ground of appeal also fails.[16]I would add that valuation is not a mathematical exercise nor is it an exact science. On the calculations produced by Wallace and Partners the LVT’s figures for the long lease values (rounded) equate to a current lease value of 92.15% compared to the 92% ratio referred to in the decision. This difference is insignificant. The price fixed by the LVT is £346,300. The appellants say that the landlords’ share of the marriage value has been understated by £6,054, presumably giving an increased price of £352,354, a difference of only 1.75%. It is impossible to value with this degree of precision. I cannot find that £352,354 is the correct price and £346,300 an incorrect price.[17]The appeals are dismissed. In the absence of a respondent I make no order as to costs. 5 DATED: 25 November 2002 (Signed) P H Clarke 6