Charles Hunt (Holdings) Limited v 77-82 Bridle Close Freehold Limited
[2023] UKUT 32 (LC)
Daejan Investments Limited v Nigel Collins & Anor
9 February 2024
[2024] UKUT 26 (LC)
Upper Tribunal
A landlord and tenant disagreed on the price for extending a lease. A judge reviewed similar property sales and other factors, deciding on a fair price of £208,109, instead of the vastly different figures offered by both parties. The judge explained how she reached this decision in detail, using property indices and legal precedents.
Key Facts
- •Appeal concerning the premium payable for an extended lease of a London flat under the Leasehold Reform, Housing and Urban Development Act 1993.
- •Disagreement between the appellant (landlord) and respondents (tenants) on the valuation of the freehold with vacant possession (FHVP), the extended lease, and the existing lease.
- •Valuation date: 8 January 2022.
- •Unexpired lease term: 53.96 years.
- •Key disputes centered on comparable properties, adjustments for time and improvements, value of precarious parking rights, and the value of Act rights.
- •Expert witnesses from both sides presented differing valuations.
Legal Principles
Calculation of premium for extended lease involves diminution in landlord's interest, landlord's share of marriage value, and compensation (if any).
Leasehold Reform, Housing and Urban Development Act 1993, Schedule 13, paragraph 2.
Marriage value is the difference between the sum of the freehold reversion value and the existing lease value, and the freehold with vacant possession value.
Carey-Morgan and Stephenson v Trustees of the Sloane Stanley Estate [2012] EWCA Civ 1181.
Existing lease valuation assumes no right to an extended lease under the 1993 Act.
Leasehold Reform, Housing and Urban Development Act 1993.
Any increase in flat value attributable to tenant's improvements must be disregarded.
Leasehold Reform, Housing and Urban Development Act 1993, Schedule 13, paragraph 4A(1)(c).
UK House Price Index (UK HPI) is preferred over Savills index for valuation adjustments due to its transaction-based nature and narrower geographical scope.
Tribunal's decision.
Savills 2015 enfranchisable graph preferred over 2002 graph due to its basis on recent market transactions.
Tribunal's decision referencing previous cases (Mundy, Midland Freeholds, Reiss).
Outcomes
FHVP valued at £1,322,500 (£940 per sq ft).
Based on Tribunal's analysis of comparable properties, adjustments for time, condition, floor level, outlook, and parking, with greater weight given to the most geographically and temporally proximate comparable properties.
Value of Act rights set at 5.85%.
Derived from a linear interpolation of values established in prior Tribunal decisions.
Existing lease value (without Act rights) at £989,500.
Calculated by deducting the value of Act rights from the date-adjusted sale price of the property, with relativity used as a cross-check.
Premium payable set at £208,109.
Based on the Tribunal's determined values for FHVP and existing lease (without Act rights).