Cravecrest Ltd v Duke of Westminster & Ors [2012] UKUT 68 (LC)

IN THE MATTER OF AN APPEAL FROM A DECISION OF THE
UT Neutral citation number: [2012] UKUT 68 (LC)Venue LEASEHOLD VALUATION TRIBUNAL FOR, THE LONDON RENT ASSESSMENT PANEL, BETWEEN CRAVECREST LIMITED Appellant, and, (1) THE SIXTH DUKE OF WESTMINSTER, THE EARL OF HOME AND, JEREMY MOORE NEWSUM, (Acting as the Trustees of the Will of the Most Noble, The Second Duke of Westminster), (2) VOWDEN INVESTMENTS LIMITED (in Administration) Respondents, Re: 38 Wilton Crescent,, London , SW1X 8RX, Before: His Honour Judge Nicholas Huskinson, Paul Francis FRICS, Sitting at: 43-45 Bedford Square, London WC1B 3AS, Thomas Jefferies , instructed by Maxwell Winward, on behalf of the appellant, Antony Radevsky , instructed by Boodle Hatfield, on behalf of the first respondent, Timothy Dutton, instructed by Walker Morris, on behalf of the second respondent, The following cases are referred to in this decision:, Earl Cadogan v Sportelli [2010] 1 AC 226, Pledream Properties Limited v 5 Felix Avenue London Ltd [2010] EWHC 3048 (Ch), Becker Properties Ltd v Garden Court NW8 Property Co Ltd [1998] 1EGLR 121, Sinclair Gardens Investments Kensington Ltd v Eardley Crescent No.75 Limited [2006] EW Lands LRA/77/2005 ., James v United Kingdom (1986) 8 EHRR 123, Cadogan v McGirk [1996] 4 ER 643, Methuen-Campbell v Walters [1979] 1 ALL ER 606, [1979] QB 525, Jones v Wrotham Park Settled Estates [1979] 1 ALL ER 286 at 295, [1980] AC 74, Manson v Duke of Westminster [1981] 2 ALL ER 40 at 48, [1981] QB 323, Chelsea Properties v Cadogan LRA/69/2006 (LT), Van Dal Footwear v Ryman [2009] EWCA Civ 1478, Grosvenor Estate Belgravia v Klaasmeyer [2010] UKUT 69 (LC), Laura Investment Co Ltd v Havering LBC [1992] 1 EGLR 155, 13 Eaton Place SW1 (LON/OOBK/OCE/ 2011 0058), Westminster City Council v CH 2006 Limited [2009] UKUT 174 (LC), Themeline v Vowden Investments Ltd [2011] UKUT 168 ., Forty Five Holdings Ltd v Grosvenor (Mayfair) Estate [2010] L&TR 21, 31 and 37 Cadogan Square Freehold v Cadogan [2010] UKUT 321 (LC) ., DECISION, Introduction
Between
Cravecrest LtdDuke of Westminster & Ors
Date 23 February 2012
[126]Mr Jefferies’ submission on this point is to the effect that all three valuers have made a mistake and that their agreed basis for assessing marriage value was wrong. We accept Mr Dutton’s submissions that if the appellant wanted to make this suggestion it should have raised the point early in the proceedings and certainly in the course of questioning the expert witnesses (its own included). The appellant did not do so. We conclude it is now too late for the appellant to pursue this point as a contested point. That would require the hearing to be reopened and the experts to be recalled to consider whether they had all made a mistake and, if so, how such a mistake should be corrected. Vowden raised too late what we have described above as the amendment point and was not allowed to reopen the question of whether the ORL was to be acquired. The appellant has raised too late this present point regarding the marriage value calculation. We refuse to allow the hearing to be reopened so as to enable the appellant to pursue the point as a contested point.[127]However we observe that neither GEB nor Vowden when responding to this point has given any indication that their respective valuers disagree with this point raised by the appellant. We know that all the valuers who appeared in this case will be aware of their duties to the Tribunal. We rely upon each valuer to consider this point regarding marriage value and to say whether they agree with the appellant and that they have all made a mistake and that of course there should be no marriage value included. If that is their agreed view then we rely upon the parties to correct the mistake and to show no marriage value included within the revised valuation we have invited the three valuers to submit in paragraph 122 above. However if there is disagreement on the point the matter must stand as shown in the existing valuations. Dated 11 May 2012 His Honour Judge Nicholas Huskinson P R Francis FRICS ADDENDUM128. The valuers have produced an agreed statement incorporating the revised valuations sought. On the basis of a 5% discount for risk, the premium becomes £6,856,500 apportioned thus: Share to freeholder £ 2,200 Share to GEB £3,705,800 Share to Vowden £3,148,500 Share to Belgravia Leasehold Properties Ltd £ nil Share to Mr Kahrmann £ nil Premium £6,856,500 In the alternative, at a discount of 15%, the figures become: Share to freeholder £ 2,200 Share to GEB £3,626,100 Share to Vowden £3,068,800 Share to Belgravia Leasehold Properties Ltd £ nil Share to Mr Kahrmann £ nil Premium £6,697,100129. In a short supplementary proof that incorporated the valuations on the basis requested by us (and which were agreed by Mr Lee and Mr Power) Mr Clark set out his own comments relating to the marriage value issue referred to in paragraphs 123-127 above in which he concluded that, as a valuer, he was unable to agree with Mr Jefferies’ proposition. Mr Power, in a short supplementary proof of evidence, has also indicated that he does not agree with the proposition.[130]In the light of this, and our conclusion in paragraph 127 above, the valuation basis must stand. We therefore determine the price at £6,856,500 calculated on the basis of a discount of 5%, as set out in Appendix D . Dated 28 June 2012 His Honour Judge Nicholas Huskinson P R Francis FRICS LRA/135/2010 38 Wilton Crescent APPENDIX A INPUT INFORMATION VALUATION OF MICHAEL LEE BSC (HONS) MRICS Valuation Date 12 March 2009 APPENDIX MRL 3 House Revised 22.2.12 Headlease number of years unexpired 0.04 Number of yrs to sub lease reversion to Flats 1 & 2 0.04 0.04 Number of yrs to sub lease rversion – Flat 3 121.02 Ground Rent rec’d by Freeholder £0.00 £0.00 Freehold Capitalisation Rate Freehold Deferment Rate - Flats 5.00% Deferment Rate – Flat 1 & 2 0.04 yrs 5.00% Freehold Deferment Rate - House 4.75% Freehold Reversion (exp of GEB) 175.03 Sub-lease number of years unexpired 0.00 Headlease Capitalisation Rates 6.00% Sinking Fund Rate 2.50% Tax @ 0.00 P in £ GIA sq .ft. FHVP LH Flat 1 – Lower Ground/Raised Ground Flat 1,626 £1,261 £2,050,000 99.00% £2,029,500 Flat 2 – First Floor/Mezz Flat 521 £1,344 £ 700,000 99.00% £ 693,000 Flat 3 – Second/Third 1,600 £1,375 £2,200,000 98.75% £2,172,500 £4,950,000 £4,895,000 House –with Fourth Floor Potential £7,000,000 99.00% £6,930,000 House – with Fourth Floor built £7,350,000 99.00% £7,276,500 FREEHOLDERS EXISTING INTEREST Capital Value of rental income Rent Reserved £0 £0 £0 Capital Value of Reversion Participating Flats 1 Lwr Grd/Grd Flat £2,050,000 2 First Floor/Mezz Flat £ 700,000 £2,750,000 Reversion to FHVP value x PV of £1 until end of term 175.03yrs 0.0002 £538 Non-Participating Flat 3 Second/Third £2,200,000 Reversion to FHVP value x PV of £1 until end of term 175.03 yrs 0.0002 £430 £968 Additional value for conversion to house House with Fourth Floor built £7,350,000 Reversion to FHVP value £7,350,000 x PV of £1 until end of term 175.03 yrs 0.0003 £2,181 -£968 £2,181 Arg £2,200 INTERMEDIATE LEASEHOLDS GROSVENOR ESTATE BELGRAVIA (“GEB”) Capital Value of rental income Rent Reserved (payable by BPL) £515 YP Dual Rate to reversion 16,5738 £8,535 Capital Value of Reversion FHVP Relativity Participating Flats Reversion to Flat 1 175 year lease 1 Lwr Grd/Grd Flat £2,050,000 99% £2,029,500 x PV of £1 0.04 yrs 5% 0.9981 £2,025,543 Reversion to Flat 2 175 year lease 2 First Floor/Mezz Flat £ 700,000 99% £ 693,000 x PV of £1 0.04 yrs 5% 0.9981 £ 691.649 £2,717,192 Non-Participating Flat Reversion to Flat 3 54 years 3 Second/Third £2,200,000 77.2% £1,698,400 x PV of £1 121 years 5% 0.0027 £4,631 Development Hope Value House with Fourth Floor potential £6,930,000 Less existing Flats -£4,895,000 Fourth Floor site -£455,000 £1,580,000 Share of gain 50% £790,000 Less Risk 40% -£316,000 Development Hope Value £474,000 £474,000 £3,204,359 BELGRAVIA LEASEHOLD PROPERTIES (“BLP”) (“Enforcer”) Capital Value of rental income Rent Reserved (payable by Kahrman) £700 Rent Payable to GEB (£515) Rent Payable to Flat 3 (£100) Profit Rent £ 85 YP Dual Rate to reversion 0.0394 £3 0 £3 say £0 No Reversion RAINER CHRISTIAN KAHRMANN (“Kahrmann”) Capital Value of rental income Rent Reserved (payable by Flat 1 & 2 Old Subleases) £300 Rent Payable (to BLP) £700 Profit Rent (£400) YP Dual Rate to reversion 0.0394 -£16 Participating Flat Value of Existing Leases (Flats 1 & 2) £0 -£16 say £0 VOWDEN INVESTMENTS )”Vowden”) Capital Value of rental income Rent Reserved (payable by Flat 1 Old sublease) £100 Rent Payable (to GEB) £ 0 Profit Rent £100 YP Dual Rate to reversion 0.0394 £4 Non-Participating Flat Value of Existing Lease (Flat 3) £2,172,500 Development Hope Value Share of gain 50% £790,000 Less Risk 50% -£395,000 Development Hope Value £395,000 £2,567,500 £2,567,504 £5,774,063 MARRIAGE VALUE Nominee Purchasers FHVP Flat 1 Lwr Grd/Grd Flat £2,050,000 Flat 2 First Floor/mezz flat £700,000 £2,750,000 less existing interests in participants flats £538 Freeholders Interest Headleases Interest GROSVENOR ESTATE BELGRAVIA (“GEB”) £2,717,192 RAINER CHRISTAIN KAHRMANN (“Kahrmann) £0 VOWDEN INVESTMENTS (“Vowden) No interest in participants flats £0 £2,717,730 £ 32,270 x 50% £16,135 Half share of marriage value £5,790,198 PREMIUM Value of F/H & Headlease current interests Freeholder £2,200 Headlessee GEB £3,024,359 BLP (Enforcer) £0 Kahrmann £0 Vowden £2,567,504 £5,744.063 Apportionment of marriage value Freehold 0.07% £11 Headlessee GEB 99.93% £16,124 BLP (Enforcer) £0 Kahrmann 0.00% £0 Vowden 0.00% £0 £16,135 100% Freehold £2,211 Headlessee GEB £2,220,483 BLP (Enforcer) £0.00 Kahrmann £0.00 Vowden £2,567,504 £5,790,198 THE GROSVENOR ESTATE 38 WILTON CRESCENT , LONDON SW1 LEASEHOLD REFORM, HOUSING & URBAN DEVELOPMENT ACT 1993 as amended Valuation of Enfranchisement Price under Schedule 6 paragraph 6(1) Valuation date: 12 March 2009 LRA/135/2010 APPENDIX B VALUATION OF JULIAN CLARK BSC MRICS JMC 3 – THIRD ALTERNATIVE VALUATION Value for conversion to a house shared by owners of Vowden & GEB interests 7 February 2012 £ £ £ £(a) (A) Valuation of Underlease held by Rainer Christian Kahrmann Underlease expires 25/03/2009 Sub-underlease of 2 nd & 3 rd Floors Flat expires 15/03/2009 Sub-underlease of 1 st Floor Flat expires 15/03/2009 Sub-underlease of Ground & Basement Flat expires 15/03/2009 Annual Rents Receivable until 15/3/2009 from Participating Tenants’ Flats (on First Floor & below) 0 Less apportioned annual rent payable of £446 until 15/03/2009 0 Annual profit/lost rent 0 Years purchase for 0.04 Years @ 6.00% SF 2.50% Tax 0.00% 0.035 0 Reversions only 10 days 0 - Annual Rent Receivable until 15/03/2009 from Non- Participating Tenants’ 2 nd & 3 rd Floor Flat 0 Less apportioned annual rent payable of £446 until 15/03/2009 0 Annual profit/lost rent 0 Years purchase for 0.04 Years @ 6.00% SF 2.50% Tax 0.00% 0.035 0 0 Reversion only 10 days - _(b) (B) Valuation of Enforcer Lease Annual rent receivable from underlease until 25/03/2009 446 Less annual rent payable under enforcer lease until 26/03/2009 100 346 Years purchase for 0.04 Years @ 6.00% SF 2.50% Tax 0.00% 0.039 14 Say(c) (C) Valuation of Overriding Lease of 2 nd & 3 rd Floor Flat (held by Non-Participating Tenant) (Vowden Investments Limited) Overriding Lease expires 21 March 2130 Annual rental income from enforcer lease 100 Less annual rent payable 0 Years purchase for 0.04 Years @ 4.25% 100 0.039 4 Estimated Value of Freehold in Possession of 2 nd & 3 rd Floor Flat 2,200,000 Adjust to lease from March 2009 to March 2130, i.e. for 121 years 0.9875 2,172,500 Plus site value for extension onto 4 th Floor, allowing for risk on planning 432,250 Less premium payable to Grosvenor for consent to alter and lease of 4 th floor 216,000 216,250 2,388,750 Deferred 0.04 Years @ 5.00% 0.9981 2,384.211 2,384,215 Add for potential of merging overriding lease with landlord’s reversion to release value of freehold in possession of entire building for conversion to a house Potential addition to value of Vowden’s interest attributable to releasing value of house now Value of Vowden’s interest accounting for potential to release value of house now 796,894 c/f 3,181,109 b/f 3,181.109(d) (D) Valuation of Head Lease (presently held by GEB) In Participating Tenants’ Flats Annual Rent Receivable _ Annual Rent Payable insignificant as fraction of £1,000 p.a. 0 _ Years purchase for 0.04 Years @ 4.25% 0.039 Estimated Value of Freehold in Possession of First Floor Flat 700,000 Adjust to lease from March 2009 to March 2184, i.e. for 175 years 0.99 693,000 Deferred 0.04 Years @ 5.00% 0.9983 691,822 Estimated Value of Freehold in Possession of Basement & Ground Floor Flat 2,050,000 Adjust to lease from March 2009 to March 2184, i.e. for 175 years 99.00% 2,029,500 Deferred 0.04 Years @ 5.00% 0.9983 2,026,050 2,717,872 In Non-Participating Tenants’ Flat - Annual Rent Receivable 0 Annual Rent Payable insignificant as fraction of £1,000 p.a. Years purchase for 0.04 Years @ 5.00% 0.039 0 Estimated proceeds from negotiation of premium to sell overriding leaseholder Landlord’s consent to build extension at 4 th Floor level Site value 455,000 Less risk on planning 5% 22,750 432,250 Take for landlord for granting consent, including rights over the airspace 50% 216,125 say 216,000 Estimated Value of Freehold in Possession of 2 nd , 3 rd & 4 th Floors Flat Second & Third Floors 2,200,000 Fourth Floor (as completed) 810,000 3,010,000 Adjust to lease from March 2130 to March 2184, i.e. for 54 years 77.20% 2,323,720 Deferred 121.02 Years @ 5.00% 0.00273 6,344 222,344 2,940,216 Add for potential of merging overriding lease with landlord’s reversion to release value of freehold in possession of entire building for conversion to a house Estimate value of freehold in possession of entire building for conversion for a house including potential to extend into the fourth floor (and accounting for all risks, including planning) 7,000,000 Adjust to lease from March 2009 to March 2184, i.e. for 175 years 0.99 6,930,000 Deferred 0.04 Years @ 4.75% 0.9983 6,918,219 Less aggregate of present values of GEB and Vowden for continued use as flats GEB Long leasehold reversion in respect of First Floor Flat 691,822 Long leasehold reversion in respect of Lower Floors Flat 2,026,050 Long leasehold reversion in respect of 2 nd & 3 rd Floor Flat incl licence premium 222,344 2,940,216 Vowden Overriding lease of 2 nd & 3 rd Floor Flat 2,384,215 5,324,431 Potential additional value for release 1,593,788 Deduct share of additional value to be shared with Vowden 50% 796,894 Net potential addition to value of GEB’s interest attributable to releasing value of house now 796,894 Value of GEB’s interest accounting for potential to release value of house now 9,737,110 c/f 3,737.110 Value of Vowden’s interest accounting for potential to release value of house now Value of GEB’s interest accounting for potential to release value of house now b/f 3,181,109 b/f 3,737,110(e) (E) Valuation of Freehold (presently held by 2DWT) In Participating Tenants’ Flats 0 Nominal apportioned ground rent de minimis Estimated Value of Freehold in Possession of 1 st Floor Flat 700,000 Lower Floors Flat 2,050,000 2,750,000 Deferred 175.03 years @ 5.00% 0.0002 550 550 In Non-Participating Tenants’ Flat Nominal apportioned ground rent de minimis 0 Estimated Value of Freehold in Possession 3,010,000 Deferred 175.03 years @ 5.00% 0.0002 602 602 1,152 Additional value for conversion to a single house Estimated value of freehold in possession for conversion to a single house GIA 4,001 + 592 = 4,593 sq. ft. @ £1,600 p.s.f. Say 7,350,000 Deferred 175.03 years @ 4.75% 0.0003 2,205 Less valued above 1,152 Additional value for conversion to a single house 1.053 2,205 6,920,424(f) (F) Add lessors’ share of marriage value in Participating Tenants’ Flats Value of proposed interests (virtual freehold values in possession) 1 st Floor Flat 700,000 Basement & Ground Floor Flat 2,050,000 2,750,000 Less Value of present interest exclusive of marriage value Freeholder 550 GEB 2,717,872 Enforcer Lease 0 Rainer Christian Kahrmann 0 2,718,422 Participating Tenants in possession 0 2,718,422 Gain on marriage 31,578 Attributed to lessors @ 50% 15,789(g) (G) Enfranchisement Price 6,936,213 say 6,936,200(h) (H) Enfranchisement Price Apportionment 1. Rainer Christian Kahrmann Value of interest exclusive of marriage value Share of marriage value 0 0 15,789 6,920,424 0 0 0 2. Belgravia Leasehold Properties Limited Value of interest exclusive of marriage value Share of marriage value 0 0 0 6,920,424 0 0 0 3. Price for Overriding lessee of 3 rd & 4 th Floors Flat (Vowden Investments Limited) Value of interest exclusive of marriage value Share of marriage value 3,181,109 3,181,109 15,789 6,920,424 7,258 3,188,367 3,188,350 4. Price of GEB’s Head Lease Value of GEB’s interest exclusive of marriage value GEB’s share of marriage value 3,737,110 15,789 3,737,110 6,920,424 8,526 3,745,636 3,745,650 Share to Grosvenor 5. Price for Freeholder Value of Freehold Interest 2,205 Freeholder’s share of marriage value 2,205 6,920.424 15,789 3,747,850 5 2,210 say 2,200 6,936,200 GERALD EVE LLP Chartered Surveyors JMC/MH8259/733 LRA/135/2010 APPENDIX C VALUATION OF TOM POWER BSC MRICS 38 WILTON CRESCENT , LONDON SW1 INPUT INFORMATION Valuation Date – 12 March 2009 Underlease expiry – 25 March 2009 Headlease expiry 0.04 Number of yrs to sub lease reversion – Flats 1, 2 & 3 0.01 Freehold Flat Deferment Rate 5.00% Freehold House Deferment Rate 4.75% Freehold Reversion 175.03 Headlease Capitalisation Rates 6.00% Sinking Fund Rate 2.50% Tax @ 0.00 P in £ FH Value Flat 1 – Lower Ground/Raised Grd Flat £2,050,000 Flat 2 – First Floor Flat £ 700,000 Flat 3 – Second/Third Floor Flat (without mansard potential) £2,200,000 Site value of roof £455.000 Developed roof value £810,000 FREEHOLDERS EXISTING INTEREST Capital Value of rent income De minimis Capital Value of Reversion 1 Lower Grd/Grd £2,050,000 2 First £ 700,000 3 Second/Third £3,010,000 £5,760,000 Reversion to FHVP value x PV of £1 until end of term 175.03 yrs 0.0002 £1,126 Additional Value for conversion to a single house £7,350,000 0.0003 VP FH value of building for reinstatement as a house x PV of £1 until end of term 175.03 yrs £2,181 £1,126 Less valued above Additional value for reinstatement £1,055 £2,181 GROSVENOR ESTATE BELGRAVIA (“GEB”) Capital Value of rental income De Minimis Capital Value of Reversion Participating flats FHVP Relativity Reversion to Flat 1 175 years x PV of £1 0.04 yrs 1 Lwr Grd/Grd £2,050.000 99% £2,029,500 0.9961 £2,025.543 Reversion to Flat 2 175 years lease x PV of £1 0.04 yrs 2 First £ 700,000 99% £693,000 0.9981 £691,649 Non-Participating flat Reversion to Flat 3 54 years lease 3 Second/Third £2,200,000 x PV of £1 121.02 years Fourth £ 810,000 77.2% £1,698,400 0.0027 £ 4,631 £2,721,823 Value of GEB’s interest excluding all hope value Hope value relating to development of fourth floor Payment receivable from Vowden for consent to alter and grant lease of 4 th floor x PV of £1 until end of term 0.04 yrs £227,500 0.9977 £226,973 Less 5% risk £ 11,349 £215,625 Value of GEB’s interest excluding hope value for reinstatement as a house £2,937,448 Hope value relating to reinstatement of building as a house Agreed FH value of 38 Wilton Crescent £7,000,000 Reversion to 175 year lease 99% £6,930,000 x PV of £1 0.04 yrs 0.9981 £6,916,489 Less aggregate of present values of GEB and Vowden for continued use of flats GEB’s interest in Flat 1 £2,025,543 GEB’s interest in Flat 2 £ 691,649 GEB’s interest in Flat 3 £ 232,131 Vowden’s reversionary interest in Flat 3 £2,383,100 £5,332,423 Potential additional value for release £1,584,066 To be shared 50-50 with Vowden 50% Net development to value of GEB’s interest attributable to releasing value of house now £792,033 x PV of £1 until end of term 0.04 years 0.9977 £790,199 Value of GEB’s interest including hope value attributable to adding fourth floor and releasing value of house £3,727,647 BELGRAVIA LEASEHOLD PROPERTIES (“BLP N Enforcer”) £0 Capital Value of rental income De Minimis RAINER CHRISTIAN KAHRMANN (Kahrmann”) £0 Capital Value of rental income De Minimis VOWDEN INVESTMENTS (“Vowden”) Capital Value of rental income £100 Profit Rent 0.0394 £4 YP Dual Rate to reversion (0.04 years) Value of intermediate Lease (Flat 3) x PV of £1 until end of term At 98.75% of FH value £2,172,500 0.04 yrs 0.9977 £2,167,471 Value of Vowden’s interest excluding all hope value £2,167,475 Hope value relating to development of fourth floor Plus site value for 4 th floor extension £455,000 Less premium payable to GEB for consent to alter and grant lease of 4 th floor £227,500 £227,500 x PV of £1 until end of term 0.04 yrs 0.9977 £226,973 Less 5% risk £ 11,349 £215,625 Value of Vowden’s interest excluding hope value for reinstatement as a house £2,383,100 Hope value relating to reinstatement of building as a house Net potential addition to value of Vowden’s interest attributable to releasing value of house £792,033 x PV of £1 until end of term 0.04 yrs 0.9977 £790.199 Value of Vowden’s interest including hope value attributable to adding fourth floor and releasing value of house £3,173,299 MARRIAGE VALUE Value of proposed interests (virtual freehold value in possession) of participating flats £2,750,000 Less value of present interests Freeholder £ 538 GEB £2,717,192 Enforcer lease £ 0 Kahrmann £ 0 Participating lessees £ 0 £2,717,730 Gain on marriage £32,270 Attributed to lessees 50% £16,135 TOTAL EXPENDITURE PREMIUM £6.919.263 APPORTIONMENT % OF MV MV Totals FREEHOLDER £2,181 0.03% £5 £2,186 GEB £3,727,647 54.00% £8,713 £3,736,360 BLP £0 0.00% £0 £0 KAHRMANN £0 0.00% £0 £0 VOWDEN £3,173,299 45.97% £7,417 £3,180,716 THE GROSVENOR ESTATE 38 WILTON CRESCENT , LONDON SW1 LEASEHOLD REFORM, HOUSING & URBAN DEVELOPMENT ACT 1993 as amended Valuation of Enfranchisement Price under Schedule 6 paragraph 6(1) Valuation date: 25 May 2012 LRA/135/2010 APPENDIX D UPPER TRIBUNAL (LANDS CHAMBER) VALUATION Applying a 5% discount to “Development Hope Value” attributable to the GEB & Vowden Interests in accordance with paragraph 120 of the UT’s interim decision £ £ £ £ (A) Valuation of Underlease held by Rainer Christian Kahrmann Underlease expires 25/03/2009 Sub-underlease of 2 nd & 3 rd Floors Flat expires 15/03/2009 Sub-underlease of 1 st Floor Flat expires 15/03/2009 Sub-underlease of Ground & Basement Flat expires 15/03/2009 Annual Rents Receivable until 15/3/2009 from Participating Tenants’ Flats (on First Floor & below) 0 Less apportioned annual rent payable of £446 until 15/03/2009 0 Annual profit/lost rent 0 Years purchase for 0.04 Years @ 6.00% SF 2.50% Tax 0.00% 0.035 0 Reversions only 10 days 0 - Annual Rent Receivable until 15/03/2009 from Non- Participating Tenants’ 2 nd & 3 rd Floor Flat 0 Less apportioned annual rent payable of £446 until 15/03/2009 0 Annual profit/lost rent 0 Years purchase for 0.04 Years @ 6.00% SF 2.50% Tax 0.00% 0.035 0 0 Reversion only 10 days - _ (B) Valuation of Enforcer Lease Annual rent receivable from underlease until 25/03/2009 446 Less annual rent payable under enforcer lease until 26/03/2009 100 346 Years purchase for 0.04 Years @ 6.00% SF 2.50% Tax 0.00% 0.039 14 Say (C) Valuation of Overriding Lease of 2 nd & 3 rd Floor Flat (held by Non-Participating Tenant) (Vowden Investments Limited) Overriding Lease expires 21 March 2130 Annual rental income from enforcer lease 100 Less annual rent payable 0 Years purchase for 0.04 Years @ 4.25% 100 0.039 4 Estimated Value of Freehold in Possession of 2 nd & 3 rd Floor Flat 2,200,000 Adjust to lease from March 2009 to March 2130, i.e. for 121 years 0.9875 2,172,500 Plus site value for extension onto 4 th Floor, allowing for risk on planning 432,250 Less premium payable to Grosvenor for consent to alter and lease of 4 th floor 216,000 216,250 2,388,750 Deferred 0.04 Years @ 5.00% 0.9981 2.384,211 2,384,215 Add for potential of merging overriding lease with landlord’s reversion to release value of freehold in possession of entire Building for conversion to a house Potential addition to value of Vowden’s interest attributable to releasing value of house now At 50% of total potential release of development value (same as for GEB) (see row 183) 796,694 Deduct allowance for risks associated with two stage sale/purchase, but assuring:
‘relevant and sufficient enquiries had been made of the other party and/or its advisers’ (UT decision para 120) 5% 39,645 Net potential addition to value of Vowden’s interest attributable to releasing value of house now 757,049 Value of Vowden’s interest accounting for potential to release value of house now 3,141,264 (D) Valuation of Head Lease (presently held by GEB) In participating Tenants’
Flats Annual Rent Receivable - Annual Rent Payable insignificant as fraction of £1,000 p.a. 0 Years purchase for 0.04 Years @ 4.25% 0.039 - Estimated Value of Freehold in Possession of First Floor Flat 700,000 Adjust to lease from March 2009 to March 2184, i.e. for 175 years 0.99 693,000 Deferred 0.04 Years @ 5.00% 0.9983 691,622 Estimated Value of Freehold of Basement & Ground Floor Flat 2,050,000 Adjust to lease from Mar 2009 to March 2184, i.e. for 175 years 99.00% 2,029,500 Deferred 0.04 Years @ 5.00% 0.9983 2.026,050 2,717,872 In Non Participating Tenants’ Flat Annual Rent Receivable - Annual Rent Payable Insignificant as fraction of £1,000 p.a. 0 Years purchase for 0.04 Years @ 5.00% 0.039 0 Estimated proceeds from negotiation of premium to self overriding leaseholder Landlord’s consent to build extension at 4 th floor level Site value 455,000 Less risk on planning 5% 22,750 432,250 Take for landlord for granting consent, including rights over the airspace 50% 216,125 say 216,000 Estimated Value of Freehold in Possession of 2 nd , 3 rd & 4 th Floors Flat 2,200,000 Second & Third Floors 810,000 Fourth Floor (as completed) 3,010,000 Adjust to lease from March 2130 to March 2184, i.e. for 54 years 77,20% 2,323,720 Deferred 121.02 Years @ 5.00% 0.00273 6,344 222,344 2,940,216 Add for potential of merging overriding lease with landlord’s reversion To release value of freehold in possession of entire building for conversion to a house Estimated value of freehold in possession of entire building for conversion to a house including potential to extend into the fourth floor (and accounting for all risks, including planning) 7,000,000 Adjust to lease from March 2009 to March 2184, i.e. for 175 years 0.99 6,930,000 Deferred 0.04 Years @ 4.75% 0.9983 6,918,219 Less aggregate of present values of GEB and Vowden for continued use as flats GEB Long leasehold reversion in respect of First Floor Flat 691,822 Long leasehold reversion in respect of Lower Floors Flat 2.026,050 Long leasehold reversion in respect of 2 nd & 3 rd Floor Flat incl licence premium 222,344 2,940,216 Vowden Overriding lease of 2 nd & 3 rd Floor Flat 2,384,215 5,324,431 Potential additional value for release 1,593,788 Deduct share of additional value to be shared with Vowden 50% 796,894 796,894 Deduct allowance for risks associated with two stage safe/purchase, but assuming ‘relevant and sufficient enquiries had been made of the other party and/or its advisers’ (UT decision para 120) 5% 39,845 Net potential addition to value of GEB’s interest attributable to releasing value of house now 757,049 Value of GEB’s interest accounting for potential to release value of house now 3,697,265 3,697,265 3,141,264 Value of Vowden’s interest accounting for potential to release value of house now Value of GEB’s interest accounting for potential to release value of house now b/f 3,697,265 (E) Valuation of Freehold (presently held by 2DWT) In participating Tenants’ Flats Nominal apportioned ground rent de minimis 0 Estimated Value of Freehold in Possession of First floor flat 700,000 Lower Floors Flat 2,050,000 2,750,000 Deferred 175.03 Years @ 5.00& 0.0002 550 550 In non-participating Tenants’ Flat Nominal apportioned ground rent de minimis 0 Estimated Value of freehold in Possession 3,010,000 Deferred 175.03 Years @ 5.00% 0.0002 602 602 1,152 Additional value for conversion to a single house Estimated value of freehold in possession for conversion to a single house GIA 4,001 + 592-4,593 sq ft @ £1,600 p.s.f. say 7,350,000 Deferred 175.03 Years @ 0.0003 2,205 Less valued above 1,152 Additional value for conversion to a single house 1.053 2,205 6,840,734 (F) Add lessors’ share of marriage value in Particpating Tenants’ Flats Value of proposed interests (virtual freehold values in possession) First Floor Flat 700,000 Basement & Ground Floor Flat 2,050,000 2,750,000 Less Value of present interest inclusive of marriage value Freeholder 550 GEB 2,717,872 Enforcer Lease 0 Rainer Christian Kahrmann 0 2,718,422 0 2,718,422 Gain on marriage 31,578 Attributed to lessors @ 50% 15,789 6,856,523 (G) Enfranchisement Price say 6,856,500 (H) Enfranchisement Price Apportionment 1 Rainer Christian Kahrmann Value of interest exclusive of marriage value 0 Share of marriage value 0 15,789 0 6,840,734 0 0 2. Belgravia Leasehold Properties Limited 0 Value of interest exclusive of marriage value 0 Share of marriage value 0 0 6,840,734 0 0 0 3. Price for Overriding issues of 3 rd & 4 th Floor Flats (Vowden Investments Limited) Value of interest exclusive of marriage value 3,141,264 Share of marriage value 3,141,264 15,789 6,640,734 7,250 3,148,615 3,148,500 4. Price for GEB’s Head Lease Value of GEB’s interest exclusive of marriage value 3,697,265 GEB’s share of marriage value 3,697,265 15,789 6,640,734 8,534 3,705,798 3,705,800 Share to Grosvenor 5. Price for Freeholder Value of Freeholder Interest 2,205 Freeholder’s share of marriage value 2,205 15,789 3,708,000 6,840,734 5 2,210 say 2,200 6,856,500

Cited in 4 later judgments