Decision Nº LRA 60 2008. Upper Tribunal (Lands Chamber), 16-09-2010
| Jurisdiction | UK Non-devolved |
| Judge | Mr Andrew J Trott FRICSHis Honour Nicholas Huskinson |
| Date | 16 September 2010 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRA 60 2008 |
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UPPER TRIBUNAL (LANDS CHAMBER) |
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UT Neutral citation number: [2010] UKUT 321 (LC)
LT Case Number: LRA/60/2008
LRA/129/2008
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LEASEHOLD ENFRANCHISEMENT − collective enfranchisement − whether price enhanced by value potentially available from a reconversion of the relevant building into a single house − extent of the additional value potentially realisable from such a reconversion − extent of risks regarding ability to obtain vacant possession and carry out such redevelopment including whether planning permission would be needed and (if needed) would be granted − how such risks would affect a properly advised hypothetical purchaser – nature of such a hypothetical purchaser and of the advice he should be assumed to act upon − Leasehold Reform, Housing and Urban Development Act 1993 section 61 and Schedule 14
IN THE MATTER OF TWO APPEALS (HEARD TOGETHER) AGAINST
THE DECISIONS OF THE LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
(2) 37 CADOGAN SQUARE FREEHOLD LIMITED Appellants
and
THE EARL CADOGAN Respondent
Re: 31 Cadogan Square and
130 Pavilion Road,
London SW1
and
37 Cadogan Square
London SW1
Before: His Honour Judge Nicholas Huskinson and Mr A J Trott FRICS
Sitting at 43-45 Bedford Square, London WC1B 3AS
on 5-9, 12 and 13 July 2010
Andrew P D Walker instructed by Bircham Dyson Bell LLP, solicitors, on behalf of the First Appellant.
Steven Jourdan QC instructed by Bircham Dyson Bell LLP, solicitors, on behalf of the Second Appellant.
K S Munro instructed by Pemberton Greenish LLP, solicitors, on behalf of the Respondent
The following cases are referred to in this decision:
Earl Cadogan v Sportelli [2007] 1 EGLR 153 (Lands Tribunal); and [2008] 1 WLR 2142 (Court of Appeal)
Richmond upon Thames LBC v Secretary of State [2000] 2 PLR 115
Cadogan Estates Limited v Panagopoulos Lands Tribunal LRA/97&108/2006 (unreported)
Earl Cadogan v 2 Herbert Crescent Freehold Ltd Lands Tribunal LRA/91/2007 (unreported)
W Clibbett Ltd v Avon CC [1976] 1 EGLR 171
West Midlands Baptist Trust v City of Birmingham [1968] 2 QB 188
Arbib v Earl Cadogan [2005] 3 EGLR 139
Arrowdell Limited v Coniston Court (North) Hove Limited [2007] RVR 39
London Rent Assessment Committee v St George’s Court Limited [1984] 1 EGLR 99
Inland Revenue Commissioners v Clay [1914] 3 KB 466
Lady Fox’s Executors v Commissioners of Inland Revenue [1994] 2 EGLR 185
Railtrack Plc v Guinness Limited [2003] 1 EGLR 124
Marazzi v Global Grange Limited [2003] 2 EGLR 42
Ivorygrove Limited v Global Grange Limited [2003] 2 EGLR 87
Transport for London (London Underground Limited) v Spirerose Limited [2009] UKHL 44
Mon Tresor and Mon Desert Limited v Ministry of Housing and Lands [2008] 3 EGLR 13
The following cases were also referred to in argument:
Earl Cadogan v Sportelli [2010] 1 AC 226 (House of Lords)
Segama NV v Penny Le Roy Ltd [1984] 1 EGLR 109
Gaze v Holden [1983] 1 EGLR 147
Earl Cadogan v Faizapour [2010] UKUT 3 (LC)
Majorstake v Curtis [2008] 1 AC 787
Marks v British Waterways Board [1963] 1 WLR 108
Gilmour Caterers Ltd v St Bartholomew’s Hospital Governors [1956] 1 QB 387
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There are before the Tribunal two appeals, each from a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (“the LVT”), regarding the calculation of the price to be paid by the nominee purchaser under the Leasehold Reform, Housing and Urban Development Act 1993 Schedule 6 upon the acquisition by that nominee purchaser of the freehold of the property in question. The case concerns the acquisition by the First Appellant of the freehold in 31 Cadogan Square and 130 Pavilion Road (hereafter together called “No.31”) and the acquisition by the Second Appellant of the freehold in 37 Cadogan Square (hereafter called “No.37”). The earlier LVT decision related to No.37 and is dated 26 February 2008 whereby the LVT decided that the price to be paid by the Second Appellant was £5,276,994. The second decision of the LVT is dated 11 July 2008 whereby it decided that the price payable by the First Appellant in relation to No.31 was £7,503,373. In each case in its calculation of the price payable the LVT identified substantial additional value in the freehold reversion to reflect the prospect of a development of the property in question by way of a reconversion of that property from one containing several flats back to a single dwellinghouse. In each case the Appellant argues that the LVT was wrong in including any such development value (or so much development value) in its calculation of the price payable and each Appellant also argues that the LVT was wrong in using a deferment rate of 4.75% as part of the exercise in calculating the price payable. These are the two points raised on each of these two appeals.
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The valuation dates are 29 August 2007 for No.31 and 19 February 2007 for No.37. In each case the relevant long leases were to expire in 2023 save in each case for one separate lease where there had been an extension to 2113. Accordingly the deferment rate to be applied in the present cases is to be applied for a period less than 20 years. The question of the proper deferment rate to be adopted in such a case falls to be decided in the light of the decision of this Tribunal and the Court of Appeal in Earl Cadogan v Sportelli [2007] 1 EGLR 153 (Lands Tribunal); and [2008] 1 WLR 2142 (Court of Appeal). A separate hearing before this Tribunal has been set for the purpose of hearing evidence and argument upon the question of the proper deferment rate. The present hearing before us was agreed by all parties to be one which should give rise to a preliminary decision of this Tribunal, being a decision given pursuant to a hearing at which all relevant matters except for the question of deferment rate were the subject of evidence and argument.
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In outline it is argued by the Respondent in each case that the value of the freehold reversion, as assessed in accordance with Schedule 6, was substantially increased by the prospect of an opportunity to develop the property in question by reconverting it into a single dwellinghouse (or into two separate units) at 2023 and that the hypothetical purchaser of the freehold reversion, when deciding how much to pay for it, would have concluded there were no substantial problems in the path of achieving a profitable such development in 2023. The Appellants argue that the hypothetical purchaser would view the prospect of such a development in 2023 to be of doubtful value even assuming it could be achieved. They further argue that the hypothetical purchaser would perceive substantial difficulties in the way of being able to bring about such a development and would pay nothing extra, or alternatively would pay little extra, for the freehold reversion for the purpose of undertaking it in 2023. In particular (and by way of outline summary) it is contended by the Appellants that the following matters would weigh in the mind of the hypothetical purchaser and would lead him to pay nothing (alternatively little) extra for the possible development opportunity in 2023:
(i) The question of the extent of any additional value (ie to reflect the prospect of reconversion) supposing vacant possession was available at the valuation date. Also the question of whether market conditions in 2023 would still be such that the same (or any) additional value could be obtained from a reconversion.
(ii) The question of whether planning permission would be needed and (if needed) would be granted for the proposed development even if such development was proposed at the valuation date rather than in 2023 – and the further question of whether additional uncertainty concerning the planning situation would be perceived having regard to the fact that the proposed development, if it was to be carried out, would not take place until 2023.
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The question of the extent of potential difficulties and delays under section 61 and Schedule 14 of the 1993 Act in obtaining possession from the relevant long lessee in each building who had already extended his lease to 2113 and the question of the level of compensation that might be payable to such lessee if possession...
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