Key Facts
- •Charles Hunt (Holdings) Limited (freeholder) appealed a First-tier Tribunal (FTT) decision on the price for collective enfranchisement of 77-82 Bridle Close.
- •The main dispute concerned the development value of the roof space and the value of the ability to grant deeds of variation allowing subletting.
- •The FTT initially erred by finding a mistake in the freeholder's expert's calculations without giving the parties a chance to comment.
- •The leases contained a covenant prohibiting subletting.
- •The freeholder's expert valued the premium at £155,000 initially, later revised to £141,000.
- •The nominee purchaser's expert valued the premium at £8,000.
Legal Principles
Leasehold enfranchisement price calculation is governed by Schedule 6 of the Leasehold Reform, Housing and Urban Development Act 1993.
Leasehold Reform, Housing and Urban Development Act 1993
Interpretation of lease covenants to determine whether subletting is prohibited.
Triplerose Limited v Beattie [2020] UKUT 180 (LC), Duval v Randolph Crescent Limited [2020] UKSC 18
Valuation of development potential should consider planning permission likelihood, costs, and risks.
Francia Properties Ltd v St James House Freehold Ltd [2018] UKUT 79 (LC)
Outcomes
The Upper Tribunal (UT) found that the lease covenant prohibited subletting.
The UT interpreted the covenant requiring the tenant to 'occupy' as prohibiting subletting, rejecting the FTT's narrower interpretation.
The UT rejected the freeholder's valuation of the ability to grant deeds of variation.
The UT found the freeholder's expert's valuation to be subjective and unreliable, considering the implausibility of a significant premium for this possibility given market conditions and legal risks (Duval v Randolph Crescent considered).
The UT assessed the development value of the roof space at £10,000.
The UT reviewed the freeholder's expert's top-down and bottom-up approaches, adjusting figures based on sales evidence and assessing the likelihood of planning permission. They considered the risk and uncertainty of a planning application at the valuation date, with limited comparative evidence.
The total premium payable for the freehold was determined to be £16,288.
This comprised the value of ground rents (£5,788), the value of the additional property (£500), and the hope value for roof development (£10,000). The value of deeds of variation was assessed as nil.