Decision Nº LRA 141 2014. Upper Tribunal (Lands Chamber), 19-11-2015 , [2015] UKUT 0619 (LC)
| Jurisdiction | UK Non-devolved |
| Judge | Mr Andrew J Trott FRICSHis Honour Nicholas Huskinson |
| Neutral Citation | [2015] UKUT 0619 (LC) |
| Date | 19 November 2015 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRA 141 2014 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2015] UKUT 0619 (LC)
UTLC Case Number: LRA/141/2014
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LEASEHOLD ENFRANCHISEMENT – purchase price on enfranchisement – amendments introduced into s.9(1A) of Leasehold Reform Act 1967 by s.23(1) of Housing and Planning Act 1986 – s.23(3) providing that these amendments do not apply on a case (such as the present) where a s.14 notice of desire to have an extended lease was given before 5 March 1986 – whether s.23(3) continues to apply, after the repeal of the presently relevant amendments made by s.23(1) of the 1986 Act, to the similar wording introduced into s.9(1AA) of the 1967 Act by s.143 of Commonhold and Leasehold Reform Act 2002 – valuation of 3.195 year existing lease
IN THE MATTER OF AN APPEAL FROM A DECISION OF THE
FIRST-TIER TRIBUNAL (PROPERTY CHAMBER)
BETWEEN:
LONDON SEPHARDI TRUST
Appellant
AND
JOHN LYON’S CHARITY
Respondent
Re: 3 Vale Close,
London
W9 1RR
Before His Honour Judge Huskinson and A J Trott FRICS
Sitting at Royal Courts of Justice, Strand, London WC2A 2LL
on
5-6 November 2015
Philip Rainey QC, instructed by Forsters LLP, for the appellant
Mark Loveday, instructed by Pemberton Greenish, for the respondent
© CROWN COPYRIGHT 2015
The following cases are referred to in this decision:
Mosley v Hickman (1986) 52 P&CR 248
Trustees of the Sloane Stanley Estate v Carey-Morgan [2011] UKUT 415 (LC)
DPP v Inegbu [2009] 1 WLR 2327 (DC)
Earl Cadogan v Sportelli [2010] 1 AC 226
Brown v McLachlan (1872) LR 4 PC 543
Stevens v General Steam Navigation Co Ltd [1903] 1 KB 890
Michaels v Harley House (Marylebone) Ltd [1997] 3 All ER 446
Britnell v Secretary of State for Social Security [1991] 2 All ER 726
Arrowdell Limited v Coniston Court (North) Hove Limited [2007] RVR 39
31 Cadogan Square Freehold Limited v Earl Cadogan [2010] UKUT 321 (LC)
The Trustees of John Lyon’s Charity v Alamouti [2014] UKUT 0087 (LC)
Earl Cadogan v Cadogan Square Limited [2011] UKUT 154 (LC)
The following further cases were referred to in argument:
L’Office Cherifien des Phosphates v Yamashita-Shinnihon Steamship Co. Ltd [1994] 1 AC 486
Earl Cadogan v Sportelli [2010] 1 AC 226
DECISION
Introduction
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This is an appeal from the decision of the First-tier Tribunal (Property Chamber) (“the F-tT”) dated 4 September 2014 whereby the F-tT decided that the price payable by the appellant (as lessee) to the respondent (as lessor) for the freehold of 3 Vale Close, Maida Vale, London W9 1RR (“the property”) upon an enfranchisement under the Leasehold Reform Act 1967 as amended was £2,888,258.
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In summary two issues arise in the present appeal. The first issue is a point of law which turns upon statutory construction and is this: The long lease at a low rent upon which the appellant's predecessor in title held the premises from the respondent was in 1983 the subject of an extension for a period of 50 years pursuant to section 14 of the Leasehold Reform Act 1967 (“the 1967 Act”). As a result the appellant’s current tenancy will expire in 2066 rather than 2016. The appellant argues that the purchase price should be calculated upon the assumption that the fee simple at the valuation date was subject to a tenancy expiring in 2066 whereas the respondent argues that the purchase price should be calculated upon the assumption that the fee simple was subject to a tenancy expiring on the original term date in 2016. The F-tT concluded that the respondent was correct and assessed the purchase price on that basis.
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Separately from the foregoing point of law there is also a disputed valuation issue. If the respondent is correct and if the price is to be calculated upon the assumption that the fee simple at the valuation date was subject to a tenancy expiring in 2016, then as at the valuation date there remained unexpired 3.195 years of the existing tenancy. A point arises in this case as to whether the F-tT was in error in its valuation of this existing tenancy. This point only arises if the F-tT was correct in concluding that the purchase price must be assessed on the basis that the existing tenancy expires in 2016 rather than 2066. The parties are agreed as to the proper purchase price to be payable in the event that the valuation exercise should be performed on the assumption that the existing tenancy expires in 2066. However in case the present matter should be appealed further in relation to the point of law mentioned above, both parties asked us that, whatever our decision might be upon the point of law, we should go on to consider the point of appeal in relation to this valuation issue regarding the proper valuation of an existing 3.195 year unexpired tenancy. The valuation issue is as follows, namely whether the F-tT made an error of law or of valuation principle when valuing this existing tenancy (i.e. expiring in 2016) such that upon a review of the F-tT’s decision this Tribunal should quash the F-tT’s decision upon this point. In case our conclusion is that the F-tT's decision on this point should be quashed both parties called valuation evidence upon this valuation issue, namely the proper valuation of an existing 3.195 year tenancy.
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So far as concerns the point of law, both parties told us that there was no authority upon it. We were also told that there is another case where effectively the same point arises which is awaiting the decision in the present case. We understand that in that other case a similarly large amount of money turns upon the correct answer to this point of law. In the present appeal the parties agree that if the appellant is correct in its argument such that the price is to be calculated upon the assumption that the existing tenancy expires in 2066 then the purchase price is £1,748,000, whereas if the respondent is correct and the price is to be calculated upon the basis of an existing tenancy expiring in 2016 then the purchase price will depend upon the outcome of the appeal upon the valuation issue but will be somewhere in the region of £2,800,000.
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Briefly stated the relevant facts so far as concerns the point of law are as follows:
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By a lease dated 12 December 1935 the property was originally demised for a term expiring on 25 December 2016.
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On a date unknown (but in any event between 19 September 1980 and 4 March 1983) the appellant’s predecessor in title served a notice of claim for a new lease under section 14 of the 1967 Act.
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Pursuant to that notice the original lease was extended under the 1967 Act on 4 March 1983. That lease expires on 25 December 2066.
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The valuation date in this claim is agreed at 14 October 2013.
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In order to understand how the point of law arises in the present case it is necessary to consider the history of the legislation so far as concerns section 9 of the 1967 Act which makes provisions regarding the purchase price.
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The history of the material provisions is as follows:
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Section 9(1) is the original provision which appeared in the 1967 Act as enacted. One of the assumptions to be made was that, if the lessee had not already had a lease extension, the price payable for the freehold interest was to be based on the assumption that the lease was to be so extended: see section 9(1)(a). However, the right to acquire the freehold originally only applied to houses with low rateable values.
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Section 9(1A) was introduced by section 118(4) of the Housing Act 1974 in consequence of the decision to give rights to the lessees of houses with high rateable values. The new method only applied where the rateable value exceeded £1,000 (London) and £500 (elsewhere). The main difference under such method is that it no longer had to be assumed the existing tenancy was to be extended for 50 years under the Act. Instead it merely had to be assumed the tenant would have a right to remain in possession under Part I of the Landlord and Tenant Act 1954 at the end of the tenancy. The wording of the new section 9(1A)(a) stated the house was to be valued “subject to the tenancy”. The wording, so far as presently relevant, of section 9(1A) prior to the amendments noted below made in 1986 was as follows:
“9(1A) Notwithstanding the foregoing subsection, the price payable for a house and premises, the rateable value of which is above £1,000 in Greater London and £500 elsewhere, on a conveyance under section 8 above, shall be the amount which at the relevant time the house and premises, if sold in the open market by a willing seller, might be expected to realise on the following assumptions:-
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on the assumption that the vendor was selling for an estate in fee simple, subject to the tenancy, but on the assumption that this Part of this Act conferred no right to acquire the freehold;”
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In various cases it was perceived by tenants that it would be advantageous to them if they first took a lease extension and then acquired the freehold. By doing this, so the tenants argued, the consequence would be that the freehold would be valued at a lower price because the tenancy (i.e. the tenancy subject...
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