Decision Nº LRA 156 2012. Upper Tribunal (Lands Chamber), 31-12-2013
| Jurisdiction | UK Non-devolved |
| Judge | Martin Rodger QC, Deputy President |
| Date | 31 December 2013 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRA 156 2012 |
UPPER TRIBUNAL (LANDS CHAMBER)
UT Neutral citation number: [2013] UKUT 0646 (LC)
UTLC Case Number: LRA/156/2012
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LEASEHOLD ENFRANCHISEMENT – collective enfranchisement - building comprising two flats with potential to convert back into a single house – relevance of participating tenant’s unwillingness to countenance development – alternative valuations of freeholder’s interest agreed - whether valuation capable of including “development hope value” – whether capable of including “development marriage value” - Leasehold Reform, Housing and Urban Development Act 1993, Schedule 6, paragraphs 3 and 4 – appeal dismissed – cross appeal allowed.
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE
LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
BETWEEN MISS E PADMORE Appellant and
THE OFFICIAL CUSTODIAN FOR CHARITIES
ON BEHALF OF THE TRUSTEES OF THE BARRY AND
PEGGY HIGH FOUNDATION Respondent
Re: 11/11A Lancaster Avenue,
Hadley Wood,
Barnet,
Hertfordshire
EN4 0EP
Before: Martin Rodger QC, Deputy President,
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on 3 December 2013
The appellant in person
Piers Harrison instructed by Gisby Harrison solicitors, for the respondent
© CROWN COPYRIGHT 2013
The following cases are referred to in this decision:
Cadogan v McGirk (1997) 29 H.L.R. 294
Cravecrest Ltd v Duke of Westminster [2012] UKUT 68
Day v Hosebay [2012] UKSC 41
Earl Cadogan v Sportelli and another [2008] UKHL 71
Forty-Five Holdings Ltd v Grosvenor (Mayfair) Estate [2009] UKUT 234 (LC)
Maryland Estates Ltd v Abbathure Flat Management Co Ltd [1999] 1 EGLR 100
Money v Cadogan Holdings Ltd [2013] UKUT 211 (LC)
Themeline Ltd v Vowden Investments [2011] UKUT 168
West Midland Baptist (Trust) Association (Inc) v Birmingham Corporation [1968] 2 QB 188
DECISION
Introduction
-
This is an appeal and cross appeal, by way of review, against a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (“the LVT”), dated 1 October 2012 on an issue of law arising in a collective enfranchisement claim under Part I of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”). The LVT determined that, applying Schedule 6 of the 1993 Act, the price payable by the appellant, Ms Elaine Padmore, to the respondent trustees on the acquisition by her of their freehold interest in 11 Lancaster Avenue, Hadley Wood, Barnet (“the Building”) was £150,000.
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The only contentious issue in these proceedings has been the proper approach to valuing the Building under Schedule 6 of the 1993 Act in light of the agreed fact that, although currently arranged as an upper and lower maisonette each of which is let under a separate lease, the Building is suitable for conversion back into a single house. It is common ground that the Building would be more valuable as a single house and that the potential to develop it in that way adds value to the respondents’ freehold interest; the parties do not agree how that value is to be reflected in the price payable for the freehold in a collective enfranchisement under the 1993 Act.
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Significantly, the parties reached agreement on the alternative valuations which would be appropriate depending on the answer which the LVT gave to the legal question it was asked to answer. The LVT selected its figure of £150,000 because it determined that, as a matter of law, the development potential of the Building should be reflected in the value of the freeholder’s interest determined under paragraph 3 of Schedule 6 (which requires an assumption that no tenant in the Building is in the market for the freehold). That approach assumed that a purchaser of the freeholder’s interest would pay a premium because of the prospect or hope of being able to reach agreement with the owner of the leasehold interests for the acquisition of those interests to enable the Building to be converted to a house. A valuation on that basis was described by the LVT as including “development hope value”.
-
In their cross appeal the respondents argue that the true price ought to be £194,000, and that it should be arrived at by taking the development potential of the Building into account when ascertaining the freeholder’s share of the marriage value determined in accordance with paragraph 4 of Schedule 6. On that basis a sum is included in the valuation to reflect the ability of the appellant herself, as nominee purchaser, to convert the premises to a house at the valuation date. That approach was described by the LVT as including “development marriage value”.
-
Before the LVT and in her appeal the appellant contends that the true price ought to be £85,000, and that it ought to take into account neither development hope value nor development marriage value. The former is said to be precluded because the appellant herself has no interest in realising the development value of the Building. The latter is prohibited, the appellant contends, because as the Tribunal held in Themeline Ltd v Vowden Investments [2011] UKUT 168, the concept of development marriage value is inconsistent with the reasoning of the House of Lords in Earl Cadogan v Sportelli and another [2008] UKHL 71.
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The LVT gave both parties permission to appeal.
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The appellant appeared in person and relied on submissions prepared by her solicitors, Bottrills solicitors, and on an expert’s report prepared by Mr Bruce Maunder Taylor FRICS, who had represented her before the LVT. The respondents, who had been represented below by Mr Antony How FRICS, were represented before me by Mr Piers Harrison of counsel.
The issues in the appeal
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The issues for consideration in the appeal and cross appeal are:
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Whether the LVT was entitled to determine a price which included development hope value or whether, as the appellant contends, it is impermissible; and
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Whether, as the respondents contend, the LVT should have determined a higher price by including development marriage value.
-
The statutory framework
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Section 1 of the 1993 Act confers on qualifying tenants of flats in premises to which Chapter 1 of Part 1 applies on the relevant date the right to have the freehold of those premises acquired on their behalf by a nominee purchaser at a price determined in accordance with Chapter 1. Section 1 describes that right as "the right to collective enfranchisement".
-
By virtue of section 32 the price payable for the freehold of the premises is to be determined in accordance with Schedule 6. The relevant provisions of the schedule for the purpose of this appeal are as follows:
"Price payable for freehold of specified premises
2.—
(1) Subject to the provisions of this paragraph, where the freehold of the whole of the specified premises is owned by the same person the price payable by the nominee purchaser for the freehold of those premises shall be the aggregate of
(a) the value of the freeholder's interest in the premises as determined in accordance with paragraph 3,
(b) the freeholder's share of the marriage value as determined in accordance with paragraph 4, and …
Value of freeholder's interest
3.—
(1) Subject to the provisions of this paragraph, the value of the freeholder's interest in the specified premises is the amount which at the relevant date that interest might be expected to realise if sold on the open market by a willing seller (with no person who falls within sub-paragraph (1A) buying or seeking to buy) on the following assumptions—
(a) on the assumption that the vendor is selling for an estate in fee simple—
(i) subject to any leases subject to which the freeholder's interest in the premises is to be acquired by the nominee purchaser, but
(ii) subject also to any intermediate or other leasehold interests in the premises which are to be acquired by the nominee purchaser;
(b) on the assumption that this Chapter and Chapter II confer no right to acquire any interest in the specified premises or to acquire any new lease (except that this shall not preclude the taking into account of a notice given under section 42 with respect to a flat contained in the specified premises where it is given by a person other than a participating tenant); …
(1A) A person falls within this sub-paragraph if he is—
(a) the nominee purchaser, or
(b) a tenant of premises contained in the specified premises, or ...
(2) It is hereby declared that the fact that sub-paragraph (1) requires assumptions to be made as to the matters specified in paragraphs (a) to (d) of that sub-paragraph does not preclude the making of assumptions as to other matters where those assumptions are appropriate for determining the amount which at the relevant date the freeholder's interest in the specified premises might...
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