Decision Nº LRA 128 2007. Upper Tribunal (Lands Chamber), 21-04-2011
| Jurisdiction | UK Non-devolved |
| Judge | Mr Andrew J Trott FRICSHis Honour Judge Reid QC |
| Date | 21 April 2011 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRA 128 2007 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2011] UKUT 154 (LC)
LT Case Number: LRA/128/2007
LRA/17/2008
(Consolidated)
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LEASEHOLD REFORM – collective enfranchisement – price payable – whether hope value in respect of non-participating flats including caretaker’s flat – relativity – use of graphs or adjustment to market comparables to allow for benefit of Act – effect of user restriction upon rental value of caretaker’s flat – assessment of valuation evidence and of comparables – meaning of “taking into account” a section 42 notice served by a non-participating tenant – form of the covenant restrictive of user which should be imposed – meaning of “participating tenant” for purposes of marriage value – Leasehold Reform, Housing and Urban Development Act 1993 Sch 6 paras 3 and 4
IN THE MATTER OF APPEALS AGAINST THE DECISION OF THE LEASEHOLD VALUATION TRIBUNAL OF THE LONDON RENT ASSESSMENT PANEL
and
CADOGAN SQUARE LIMITED Respondent
AND BETWEEN CADOGAN SQUARE LIMITED Appellant
(LRA/17/2008)
and
Re: 38 Cadogan Square, London SW1
Before: His Honour Judge Reid QC
and
A J Trott FRICS
Sitting at: 43-45 Bedford Square London WC1
on 11, 12, 15 and 16 November 2010
Kenneth Munro, instructed by Pemberton Greenish LLP, for The Earl Cadogan and Cadogan Estates Limited
Stephen Jourdan QC, instructed by Forsters LLP, for Cadogan Square Limited
The following cases are referred to in this decision:
Earl Cadogan v Sportelli [2007] 1 EGLR 153 (Lands Tribunal); [2008] 1 WLR 2142 (Court of Appeal); [2008] UKHL 71 (House of Lords)
Bircham v Clarke [2006] Lands Tribunal LRA/63/2005 (unreported)
Chelsea Properties Limited v Earl Cadogan [2007] Lands Tribunal LRA/69/2006 (unreported)
Blendcrown Limited v Church Commissioners for England [2004] 1 EGLR 143
31 Cadogan Square Freehold Limited v The Earl Cadogan [2010] UKUT 321 (LC)
Lloyd-Jones v Church Commissioners [1982] 1 EGLR 209
In re Shulem B Association Ltd’s Appeal [2001] 1 EGLR 105
Culley v Daejan Properties Limited [2009] UKUT 168 (LC)
Arbib v Earl Cadogan [2005] 3 EGLR 139
Nailrile v Earl Cadogan [2009] RVR 95
Arrowdell Ltd v Coniston Court (North) Hove Ltd [2007] RVR 39
Plinth Property Investments Ltd v Mott, Hay & Anderson (1977) 38 P&CR 361 (CA)
Crammond v Theodore Gregory Limited [2004] LON/SC/00AW/NSI/2003/0076 (LVT) (unreported)
Sterling Land Office Developments Ltd v Lloyds Bank plc [1984] 2 EGLR 135
Earl Cadogan v Cadogan Square Ltd [2005] LON/ENF/1800/06 (LVT) (unreported)
McHale v Earl Cadogan [2010] EWCA Civ 1471
Moreau v Howard de Walden Estates Limited [2003] Lands Tribunal LRA/2/2002 (unreported)
Higgs v Paul [2005] Lands Tribunal LRA/2/2005 (unreported)
Peck v Trustees of Hornsey Parochial Charities (1971) 22 P & CR 789
Le Mesurier v Pitt (1972) P & CR 389
The following cases were referred to in argument:
Donath and another v Second Duke of Westminster’s Trustees [1997] 1 EGLR 203
Cadogan v Pockney [2004] Lands Tribunal LRA/27/2003 (unreported)
Cadogan v Cecil [2001] Lands Tribunal LRA/10/2000 (unreported)
Sterling Land Office Developments Ltd v Lloyds Bank plc [1984] 2 EGLR 135
Dependable Homes Ltd v Mann [2009] UKUT 171 (LC)
Introduction
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In this case there are two appeals, one (LRA/128/2007) by the landlords, Earl Cadogan and Cadogan Estates Limited (“Cadogan”) and the other (LRA/17/2008) by the nominee purchaser, Cadogan Square Limited (“the Nominee Purchaser”). The appeals are against the decision of the Leasehold Valuation Tribunal (“LVT”) dated 3 July 2007, as corrected by a correction certificate dated 26 July 2007, in respect of the terms of enfranchisement of 38 Cadogan Square, London SW1 (“the Property”). By its corrected decision the LVT determined that the enfranchisement premium payable in respect of the freehold of the property was £1,836,419 and in respect of the intermediate landlord’s interest was £52,266, making a total of £1,888,685. It also determined the terms of a restrictive covenant to be included in the transfer. These appeals relate to a number of issues arising from the LVT’s valuation and as to the terms of the restrictive covenant.
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Mr Kenneth Munro of counsel appeared for Cadogan and called Mr Cerian Jones BSc FRICS, a partner at Cluttons LLP. Mr Stephen Jourdan QC of counsel appeared for the Nominee Purchaser and called Mr Gavin Buchanan BSc MRICS, a partner in Knight Frank LLP.
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We made an accompanied inspection of flats 1 and 2 of the Property and of flat 5 at 70-72 Cadogan Square on 15 November 2010. We also made unaccompanied external inspections of a number of comparables in Cadogan Square.
Facts
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38 Cadogan Square is a mid-terrace late Victorian building of traditional construction on basement, ground and four upper floors. It is located just off the north-west corner of Cadogan Square and has oblique views of the communal gardens in the centre of the Square. The building lies within the Hans Town Conservation Area and is Grade II listed. There is a raised garden at the rear of the property, which backs onto a rear mews house, 44 Clabon Mews, which is not included in the claim.
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The building is approached via stone steps up from the pavement. The communal front door opens into an entrance hall leading to a lift and staircase to upper floors and basement. The lift serves all floors and it opens directly into the fourth floor flat (flat 5). The building has been converted into six self-contained units including a caretaker's flat in the basement.
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The property is the subject of a headlease for a term of 62.5 years from 29 September 1960 expiring 25 March 2023, at a rent of £775 per annum without review. This lease is vested in the Nominee Purchaser.
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The headlease requires the property to be used as a self-contained flat on each of the upper floors, a self-contained maisonette on the ground floor and rear of the basement, a self-contained flat for the caretaker in the front of the basement, and tenants' stores and boiler room in the basement.
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In the underleases of flats 1, 2 and 3 the headlessee covenants to provide a resident caretaker but there is no specific provision enabling the headlessee to recover notional rent on the caretaker's flat. The service charge contribution payable by flat 1 is 3/11ths of the total. The contribution of flats 2 and 3 is each 2/11ths of the total expenditure.
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The underlease of flat 4 permits the headlessee to provide such caretaking staff as it deems necessary and where accommodation is provided for the residence of such a person, a sum equivalent to the market rent of such accommodation can be recovered from the underlessee. The service charge contribution of this flat is such percentage as the lessor considers appropriate. It is agreed for the purposes of these appeals that the share of service charge applicable to flat 4 is 2/11ths of the total expenditure.
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In the underlease of flat 5, the headlessee covenants to provide a resident caretaker and can recover the rack rent letting value of the caretaker's flat. The service charge contribution of this flat is 2/11ths of the total expenditure.
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The headlease requires the headlessee to provide for the premises a full time caretaker who shall reside in the caretaker's flat on a service basis.
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All of the underleases are on internal repairing terms and provide for the payment of a service charge relating to the maintenance, repair and insurance of the building.
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By an originating application dated 8 November 2005 Cadogan sought determination by the LVT of the premium to be paid for the Property and the terms of the freehold transfer of the Property. It was stated that no terms had been agreed between the parties and that Cadogan considered the appropriate price to be a total of £3,366,225. This sum comprised £3,356,910 for the freehold of the specified premises, £5,000 for the freehold of appurtenant premises and £4,315 for the intermediate landlord’s interest.
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The initial notice, dated 21 June 2005, had been...
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