Decision Nº LRA 145 2014. Upper Tribunal (Lands Chamber), 30-11-2015 , [2015] UKUT 0651 (LC)
| Jurisdiction | UK Non-devolved |
| Judge | Mr Andrew J Trott FRICSHis Honour Nicholas Huskinson |
| Neutral Citation | [2015] UKUT 0651 (LC) |
| Date | 30 November 2015 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRA 145 2014 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2015] UKUT 0651 (LC)
UTLC Case Number: LRA/145/2014
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LEASEHOLD ENFRANCHISEMENT – purchase price – deferment rate – flat in Shepherd's Bush – whether the risks regarding urban cycle and obsolescence justified departure from deferment rate suggested in Earl Cadogan v Sportelli – relativity of value of 72 year lease to the value of freehold – use of graphs – appeal dismissed
IN THE MATTER OF AN APPEAL FROM A DECISION OF THE
FIRST-TIER TRIBUNAL (PROPERTY CHAMBER)
BETWEEN:
HONG XUE
Appellant
AND
(1) MR FRANCIS W R CHERRY
(2) MRS JANET R CHERRY
Respondents
Re: Upper Flat,
17 Ormiston Grove,
London
W12 OJR
Before His Honour Judge Huskinson and A J Trott FRICS
Sitting at Royal Courts of Justice, Strand, London WC2A 2LL
on
23 November 2015
Colin Hurst MRICS of Colin Hurst and Partners for the appellant
Paul Harper LLB (Hons) of Collingwoods for the respondents
© CROWN COPYRIGHT 2015
The following cases are referred to in this decision:
Earl Cadogan v Sportelli [2007] 1 EGLR 153 (LRA/50/2005)
Earl Cadogan v Sportelli [2007] EWCA Civ 1042
Zuckerman v Trustees of the Calthorpe Estates [2009] UKUT 235 (LC)
London Sephardi Trust v John Lyon’s Charity [2015] UKUT 0619 (LC)
Arrowdale Limited v Coniston Court (North) Hove Limited [2007] RVR 39
Nailrile v Earl Cadogan [2009] RVR 95
The following further cases were referred to in argument:
Daejan Investments Ltd v Benson [2013] 1 WLR 854
Voyvoda v Grosvenor West End Properties [2014] L & TR 10
Kosta v Trustees of the Phillimore Estate [2014] L & TR 25
DECISION
Introduction
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This is an appeal from the decision of the First-tier Tribunal Property Chamber (Residential Property) (“the F-tT”) dated 14 August 2014 whereby the F-tT decided that the price payable by the appellant to the respondents for the granting of an extended lease (pursuant to the Leasehold Reform, Housing and Urban Development Act 1993) of the top flat at 17 Ormiston Road, London W12 OJR was £39,000.
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17 Ormiston Road is a Victorian mid-terrace house in a residential road in Shepherd’s Bush. The property was originally one single house but has now been divided into two self-contained dwelling units, the ground floor remaining in the ownership of the respondents who retain the ownership of the freehold and who are the landlords of the appellant. The appellant holds the upper unit, which can conveniently be called the top flat, from the respondents upon a long lease at a low rent and it is in the right of holding this lease that the appellant is entitled to acquire the grant of an extended lease pursuant to the 1993 Act.
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Various matters were agreed before the F-tT. One matter which was not agreed before the F-tT and which the F-tT therefore determined was the freehold vacant possession value of the flat as compared with the agreed long leasehold value of the flat. The F-tT decided that the freehold should be reflected by a 0.5% uplift on this long leasehold value and there is no appeal against that aspect of the decision.
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In consequence there are two points which remain in dispute so far as concerns the assessment of the price to be paid. The parties have prepared a statement of agreed facts and issues. Taking first the agreed facts they are these:
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The valuation date is 2 October 2013.
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The present lease is for 99 years from 25 December 1986.
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The years unexpired as at the valuation date were 72.167.
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The long lease value is £650,000.
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The freehold value of the flat without a leasehold interest is £653,250.
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The value to be put upon the capitalisation of the ground rents is £3,085.
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The following two matters, which are necessary ingredients in the calculation of the price to be paid, remain in dispute and are the subject of the present appeal namely:
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The deferment rate to be applied when calculating the value as at the valuation date of the reversion. This reversion would confer upon its owner vacant possession of the flat in 72.167 years. The appellant contends for a deferment rate of 5.695%. The respondents contend for 5% (the figure adopted by the F-tT).
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The relativity, that is to say the percentage of the freehold value (namely £653,250) which represents the value of the unexpired term of 72.167 years as at the valuation date. The appellant contends for a relativity of 96%. The respondents contend for 91.4% (the figure adopted by the F-tT).
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Before the F-tT Mr Hurst on behalf of the appellant adduced substantial evidence and presented substantial argument upon both the question of the deferment rate and the question of relativity. The evidence presented was not exactly as presented to us on this appeal, but it is accepted by Mr Harper that in substance evidence and argument broadly as extensive and to the same effect as that presented to us was presented to the F-tT.
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In granting permission to appeal the Deputy President observed that it is arguable that the F-tT did not sufficiently engage with the evidence presented to it and that it gave an inadequate explanation of its reasons for rejecting the appellant’s case. It was ordered that the appeal before the Upper Tribunal should proceed by way of review with a view to a rehearing – i.e. such that there would be a rehearing if it was decided at the review stage that the F-tT’s decision could not stand.
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At the hearing before us the representation was the same as it was before the F-tT namely:
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The appellant was represented by Mr Colin Hurst of Colin Hurst and Partners, who acted both as advocate and as expert witness on behalf of the appellant. Mr Hurst is a chartered surveyor (MRICS) who has undertaken surveying and valuation functions in the south east of England for the last 30 years and most frequently in west London. He has substantial other professional experience and qualifications including a degree in soil science from Reading University, a Diploma in surveying from what is now East London University, and a Higher National Certificate in civil engineering.
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Mr Paul Harper of Collingwoods appeared on behalf of the respondent, both as advocate and as expert witness. Mr Harper has a Law Degree LLB (Hons), he has worked and lived in Shepherd’s Bush and Hammersmith for about 26 years and he commenced employment with Collingwoods in 1988. Collingwoods have been established in Hammersmith since 1932 and they manage residential property portfolios and also undertake sales and lettings of both residential and commercial property.
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Both Mr Hurst and Mr Harper gave sworn evidence before us.
Review stage
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It is first necessary, at the review stage of this appeal, to consider whether the F-tT’s decision can properly stand such that no rehearing is appropriate. We can take this aspect of the appeal briefly.
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As already indicated there was presented to the F-tT by Mr Hurst substantial evidence and argument upon both the question of the deferment rate and the question of relativity. The totality of the F-tT’s reasoning in rejecting Mr Hurst’s argument and evidence on the deferment rate is contained in paragraph 6 of the F-tT’s brief decision:
“The Respondents’ representative stated that he felt that the appropriate deferment rate was 5% in line with Sportelli. The Applicant’s valuer argued that the risk of obsolescence merited a 0.25% increase on Sportelli and that a further 0.25% increase was justified by the increased risk of investment in the W12 postcode area and finally that another increase of 0.25% should be added for the increased burden of administration giving a total of 5.75% as an appropriate deferment rate. The Tribunal was not persuaded by the Applicant’s arguments and considered that the differences were amply reflected in the capital values of the property. It therefore determines that the deferment rate in the instant case will remain at 5%.”
As regards the evidence and argument advanced by Mr Hurst upon relativity the F-tT noted that Mr Hurst rejected various published graphs in favour of his own calculations and graphs. The F-tT rejected Mr Hurst’s analysis in the following passage in paragraph 9 of its decision:
“The Tribunal was not persuaded by his arguments and although acknowledging the imperfections in the RICS statistics prefers to follow the conventional analysis as reflected in many previous First-tier and Upper Tribunal decisions.”
The F-tT then considered the various published graphs and decided that the most relevant were the three graphs referred to in paragraph 10 of its decision.
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We asked Mr Harper whether he contended that the F-tT had given clear and sufficient reasons for its decision in rejecting Mr Hurst’s evidence and argument upon the deferment rate and relativity. Mr Harper (correctly in our view) indicated that he did not wish to advance any such contention and he left it to us to decide whether the F-tT’s decision could stand. We conclude that the F-tT’s analysis of the evidence and arguments presented by Mr Hurst does not constitute clear and sufficient reasons for rejecting them....
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