Day & Anor v 32 Rosary Gardens (Freehold) Ltd, Court of Appeal - Lands Tribunal, September 15, 2005,  EWLands LRA_87_2004
|Resolution Date:||September 15, 2005|
|Issuing Organization:||Lands Tribunal|
|Actores:||Day & Anor v 32 Rosary Gardens (Freehold) Ltd|
48© CROWN COPYRIGHT 20051 LRA/23/2004 LRA/62/2004 LRA/08/2005 LRA/87/2004 LRA/18/2005 LANDS TRIBUNAL ACT 1949 LEASEHOLD ENFRANCHISEMENT - houses and flats in central London - appeals heard together regarding deferment rate - no convention that 6% established - absence of market evidence - decisions of LVTs and Lands Tribunal - settlements - financial markets - index-linked gilts - appeals allowed - deferment rates of 4½%, 4¾% and 6.4% applied - Leasehold Reform Act 1967, s9(1C) and Leasehold Reform, Housing and Urban Development Act 1993, Schedules 6 and 13 IN THE MATTER of APPEALS against DECISIONS of the LEASEHOLDVALUATION TRIBUNAL of the LONDON RENT ASSESSMENT PANEL BETWEEN JAMES ASHLEY ARBIB Appellant and EARL CADOGAN Respondent Re: 40 Chelsea Square, London SW3 (LRA/23/2004)____________________BETWEEN EARL CADOGAN AND Appellants CADOGAN ESTATES LIMITED and 55/57 CADOGAN SQUARE Respondents FREEHOLD LIMITED Re: 55/57 Cadogan Square, London SW1 (LRA/62/2004)____________________BETWEEN EARL CADOGAN Appellant and DORRIT MOUSSAIEFF Respondent Re: First and Second Floor Flat, 8 Cadogan Square, London SW1 (LRA/8/2005) ___________________BETWEEN HUGO BENJAMIN DAY AND Appellants LADY HILARY MAUREEN GREENSLADE DAY and 32 ROSARY GARDENS (FREEHOLD) LIMITED Respondents Re: 32 Rosary Gardens, London SW7 (LRA/87/2004) ____________________BY EARL CADOGAN AND CADOGAN HOLDINGS LIMITED Appellants Re:9 Astell Street and Garage 8 Britten Street, London SW3 (LRA/18/2005)____________________ Before His Honour Judge Michael Rich QC and P H Clarke FRICS Sitting at Procession House, London EC4 on 27-9 July, 1-5 and 9 August 2005The following cases are referred to in this decision:Cadogan Holdings Limited v Pockney (2004) (LRA/27/03)Blendcrown Limited v Church Commissioners for England  1 EGLR 143Wellcome Trust Limited v Romines  3 EGLR 229Re Day (2004) (LRA/28/03)Lloyd-Jones v Church Commissioners for England  1 EGLR 209Cadogan Estates Limited v Hows  2 EGLR 216Curtis v London Rent Assessment Committee  QB 92Land Securities Plc v Westminster City Council (1992) 44 EG 153Clinker & Ash Limited v Southern Gas Board (1967) 203 EG 735Gallagher Estates Limited v. Walker (1973) 28 P&CR 113Maryland Estates Limited v Abbathure Flat Management Co Limited (1999) 06 EG 177The following further cases were referred to in argument:Farr v Millersons Investments Limited (1971) 22 P & CR 1055Mimmack v Solent Land Investments Limited (1973) 26 P & CR 139Carthew v Alleyn's College (1974) 231 EG 809Nash v Castell-Y-Mynach Estate (1975) 234 EG 293Briddon v Field (1975) 234 EG 840Howard de Walden Estates Limited v Disozeghy (2000) (LRA/9/2000)West Midland Baptist (Trust) Assn (Inc) v Birmingham City Corporation  AC 874W Clibbett Limited v Avon County Council  RVR 131Stein v Eyre Estate (2001) (LRA/11/2000)Thiery v John Lyon's Charity (2002) (LRA/44/2002)Cadogan v Cecil (2000) (LRA/10/2000)Langinger v Cadogan (2000) (LRA/46/2000)Sharp v Cadogan (1997) (LRA/33&35/97)Spath Holme Limited v Greater Manchester and Lancashire Rent Assessment Committee (1995) 28 HLR 107Jonathan Brock QC instructed by Bircham Dyson Bell for James ArbibKenneth Munro instructed by Pemberton Greenish for Earl Cadogan, Cadogan Estates Limited, Cadogan Holdings Limited and Hugo Day and Lady DayAndrew Walker instructed by Bircham Dyson Bell for 55/57 Cadogan Square Freehold Limited and Dorrit MoussaieffStan Gallagher instructed by Jennifer Israel & Co for 32 Rosary Gardens (Freehold) Limited. DECISIONINTRODUCTION1. These are six appeals (heard together) relating to the price payable on enfranchisement or for an extended lease for houses or flats in central London. Four appeals by the freeholders are solely concerned with the deferment rate to be applied to the reversionary value; one appeal is concerned not only with this issue but also with a claim for a discount to be given for freehold ownership; and an appeal by the leaseholder relates to the freehold vacant possession value of 40 Chelsea Square, in respect of which the freeholder has made an appeal in respect of the deferment rate. The question of the appropriate deferment rate has continued to produce a significant number of applications for permission to appeal to this Tribunal and is clearly a matter of wide concern. It was felt that comprehensive consideration of this issue should be given by the Tribunal to reduce the number of appeals in the future. 2. This is a composite decision dealing with all appeals. It is structured as follows. First, we set out the facts relating to each appeal with a brief summary of the evidence. Second, we determine the freehold vacant possession value of 40 Chelsea Square, the subject of an appeal by the tenant. Third, we deal with deferment rates, generally and specifically for each property. Fourth, we set out our decision in each appeal. (Our valuations are contained in five appendices). Finally, we refer to costs. 3. In Appendix 1 to this decision we set out a brief summary of each case in tabular form.4. On 15 August 2005 we inspected internally 40 Chelsea Square, 55/57 Cadogan Square and 32 Rosary Gardens and made external inspections of the Chelsea Square comparables, 8 Cadogan Square and 9 Astell Street.PART 140 Chelsea Square (Arbib v Cadogan) (LRA/23/04)5. In this appeal and cross appeal, heard on 27-29 July and 1, 2 and 9 August 2005, Jonathan Brock QC appeared for the tenant and Kenneth Munroe for Cadogan. We heard evidence from James Arbib, the tenant; Robert Orr-Ewing, a partner in Knight Frank, and Noel Flint MRICS, a proprietary partner in Knight Frank, for the appellant and from Roland Cullum FRICS FIRPM, a partner in Cluttons, for Cadogan.6. 40 Chelsea Square comprises a detached house and garden in the south west corner of the square. It is described in detail in the second part of this decision. The freehold is held by Cadogan; the leasehold by Mr Arbib under two leases which expire on 25 December 2027. He purchased this leasehold interest in May 1997 for £4,762,531. 7. On 1 April 2003 Mr Arbib served notice to acquire the freehold under the Leasehold Reform Act 1967 (``the 1967 Act''). The price is to be assessed under section 9(1C) and the valuation date is 1 April 2003. The LVT determined the price at £4,210,000, assessing the freehold vacant possession value at £11,500,000 and the deferment rate at 6%. Mr Arbib appealed to this Tribunal against the freehold value; Cadogan cross appealed against the deferment rate. The appeals were consolidated with Mr Arbib as appellant. 8. The parties' evidence regarding freehold vacant possession value is considered in the second part of this decision. As to the deferment rate, Mr Orr-Ewing believed that this should remain at a minimum of 6%, an opinion based on LVT decisions, settlements, the absence of market evidence, his conclusion that deferment rates should be higher than base rate and the reduced expectation of growth in the London residential market. Mr Cullum spoke to a deferment rate of 4¾%. He referred to falling yields in other forms of investment, falling interest rates, low inflation, low rack rental yields, settlements and recent Lands Tribunal decisions (notably Cadogan Holdings Limited v Pockney (2004) (LRA/27/03), Blendcrown Limited v Church Commissioners for England  1 EGLR 143 and Re Day (2004) (LRA/28/03)). 55/57 Cadogan Square (Cadogan v 55/57 Cadogan Square Freehold Limited) (LRA/62/2004) and First and Second Floor Flat, 8 Cadogan Square (Cadogan v Moussaieff) (LRA/8/2005)9. These appeals were heard together on 2-4 and 9 August 2005. Kenneth Munroe appeared for Cadogan and Andrew Walker for the respondents. We heard evidence from Julian Clark BSc MRICS, a partner in Gerald Eve, for Cadogan, and from Justin Shingles, of Justin Shingles Limited, for both respondents.10. Cadogan Square is located close to Knightsbridge, to the west of Sloane Street and to the north of Kings Road. 55/57 Cadogan Square comprises two adjoining town houses built towards to the end of the nineteenth century and situated on the corner of Cadogan Square and Cadogan Gate. The property now comprises 10 flats. The freehold is held by Cadogan. A headlease is held on trust by Trevor John Developments Limited (a dissolved company) for the benefit of the respondents. The parties have agreed that the respondents are headlessees for the purposes of this claim. This lease expires on 24 June 2076. Nine flats are let on underleases expiring on 20 June 2076. One flat is a caretaker's flat. 11. The appeal in respect of 55/57 Cadogan Square concerns a claim for collective enfranchisement by the respondents as nominee purchaser under the Leasehold Reform, Housing and Urban Development Act 1993 (``the 1993 Act''). The price is to be assessed under Schedule 6 and the valuation date is 28 April 2004. The only issue before the LVT was the deferment rate, determined at 6%. The LVT gave leave to appeal to this Tribunal. 12. 8 Cadogan Square is a former town house built towards the end of the nineteenth century and situated on the north side of the square. It has accommodation on basement, ground and six upper floors and is divided into four flats and a caretaker's flat. This appeal is concerned with the first and second floor flat. The freehold is held by Cadogan. A headlease of the whole building is held by The 8 Cadogan Square Management Co Ltd and expires on 25 March 2023. The underlease of the first and second floor flat is held by the respondent and expires on 8 March 2003. 13. On 17 October 2003 the respondent gave notice claiming an extended lease under the 1993 Act. The premium is to be assessed under Schedule 13 and the valuation date is 17 October 2003. The LVT fixed the premium at £978,168 (apportioned £975,500 to Cadogan and £2,668 to the intermediate leaseholder) using a deferment rate for the freehold reversion of 6%. Permission to appeal on...
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