The Sloane Stanley Estate v Morgan & Anor, Court of Appeal - Lands Tribunal, October 10, 2011,  UKUT 415 (LC)
|Resolution Date:||October 10, 2011|
|Issuing Organization:||Lands Tribunal|
|Actores:||The Sloane Stanley Estate v Morgan & Anor|
12© CROWN COPYRIGHT 20111UPPER TRIBUNAL (LANDS CHAMBER)UT Neutral citation number:  UKUT 415 (LC)LC Case Number: LRA/86/2009 TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007LEASEHOLD ENFRANCHISEMENT - collective enfranchisement - leases of less than 5 years unexpired - leasehold vacant possession values (relativity) - potential for provision of additional flat(s) on roof - hope value - deferment rate - terms of transfer - appeal allowed in part - enfranchisement price £2,961,613 IN THE MATTER OF AN APPEAL FROM A DECISION OF THE LEASEHOLD VALUATION TRIBUNAL FORTHE LONDON RENT ASSESSMENT PANELBETWEEN TRUSTEES OF THE SLOANE STANLEY ESTATE Appellants and CHARLES CAREY-MORGAN (1) JOHN MATTHEW STEPHENSON (2) RespondentsRe: Vale Court, 21 Mallord Street, London SW3 6AL Before: The President and Paul Francis FRICS Sitting at: 43-45 Bedford Square, London WC1B 3AS on 4-6 April 2011Kenneth Munro, instructed by Pemberton Greenish LLP, solicitors of London SW3, for the appellant landlordsJames McDonald for the respondent lessees The following cases are referred to in this decision:Earl Cadogan v Sportelli  1 AC 226;  EWCA Civ 1042Cadogan Square Properties Ltd and Others v Earl Cadogan  UKUT 427 (LC)Cadogan v Erkman  UKUT 90 LCCadogan v Cadogan Square Ltd  UKUT 154 (LC)Culley v Daejan Properties Ltd  UKUT 168 (LC)The following cases were also referred to in argument:Arbib v Earl Cadogan  3 EGLR 13931 Cadogan Square Ltd v Earl Cadogan  UKUT 321 (LC)Arrowdell v Coniston Court (North) Hove Ltd  RVR 39Nailrile Ltd v Earl Cadogan  RVR 95Phillips v Brewin Dolphin Bell Lawrie Ltd  1 WLR 143Dependable Homes Ltd v Mann  UKUT 171 (LC) Moreau v Howard de Walden Estates (2003) LT Ref: LRA/2/2002 (Unreported) DECISIONIntroduction1. Mr Charles Carey-Morgan and Mr John Stephenson, acting on behalf of themselves and the other 11 nominee purchasers involved in the collective enfranchisement of Vale Court, 21 Mallord Street, London SW3 6AL, appeal, with permission of this Tribunal, against a decision and supplementary decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel dated 16 December 2008 and 24 April 2009 respectively. The LVT's initial decision, which followed hearings held over four days between September and November 2008, dealt with five issues that were in dispute. It provisionally determined the premium payable for the freehold pursuant to the provisions of Schedule 6 to the Leasehold Reform, Housing and Urban Development Act 1993 at £2,652,389. No allowance was made for hope value, but in its decision the LVT said that it had had the opportunity to consider the House of Lords' judgment in Earl Cadogan v Sportelli  1 AC 226 which had been published since the hearings, and invited the parties to make further submissions on that issue. Following a further hearing on 5 March 2009 the LVT determined hope value at an additional £14,048, creating a premium of £2,666,407. In its statement of case, the appellant sought an enfranchisement price of £3,568,403. 2. Mr Kenneth Munro of counsel called Mr Damian Greenish, one of the trustees of the Sloane Stanley Estate, as a witness of fact for the appellant. He also called, in connection with the roof development issue, Mr Anthony Hayes, principal of the Michael Barclay Partnership LLP of London WC2, who gave structural engineering evidence, Mr Graham Anthony Oliver BA MA MRTPI, a partner in Gerald Eve, Chartered Surveyors and Property Consultants, who gave planning evidence and Mr Anthony Walker Dip Arch (dist) Grad Dip (cons) AA RIBA AABC of DLG Architects, London E1 who gave evidence in respect of Conservation Area matters. Mr Einar Roberts BSc (Hons) MLE MRICS a partner in Cluttons LLP Chartered Surveyors and Property Consultants of London W1 gave valuation evidence.3. Mr James McDonald, for the respondent lessees, called Mr Charles Carey-Morgan as a witness of fact, together with Mr Ronald McDonald MRICS, principal of the McDonald Partnership of London SE21, who gave evidence on planning and valuation issues. References in this decision to Mr McDonald are to Mr Ronald McDonald.Facts 4. Vale Court comprises an L-shaped purpose-built mansion block constructed in the 1920s of brick with multi-pane Georgian style sash windows under flat roofs. It is located on the corner of Mallord Street and The Vale in the Royal Borough of Kensington and Chelsea. It comprises 25 self-contained lateral apartments on basement, raised ground and three upper floors. A small enclosed garden area to the rear is not included within the proposed transfer. The property abuts the Telephone Exchange Building (19 Mallord Street), which is also in the freehold ownership of the appellant landlords, and beyond that is another residential mansion block - Tryon House (17 Mallord Street). On The Vale elevation Vale Court is adjacent to buildings that front onto Kings Road. These have retail/commercial uses at ground floor. The building is in an otherwise predominantly residential location that forms part of the Chelsea Park Conservation Area.5. Access to the roofs over Vale Court is available from a staircase leading off the main communal stairwell, and the area contains a number of chimneys, aerial installations and water tank housings.6. While the appeal relates to the enfranchisement price for the whole block, the issues (see below) relating to relativity and deferment rate are concerned solely with the 6 flats which are subject to leases that have 4.74 years unexpired - flats 6, 9, 12, 13 16 and 20. Flats 3 and 4, also with less than 5 years unexpired, are to be the subject of a lease-back arrangement, and the enfranchisement price therefore excludes any value for those units as terms have been separately agreed. The hope value issue relates to the flats of non-participants that have less than 80 years unexpired, namely flat 1 (70.25 years) and flats 6, 13, 16 and 20 (4.74 years). Terms for the other leasehold interests within the purchase have been agreed as part of the enfranchisement premium. It has also been agreed that the valuation date is 24 September 2007, the capitalisation rate is to be taken at 5.25%, the deferment rate for the leases other than those with less than 5 years unexpired is 5% and the value of the land to the front and side of the property is £5,000.Issues7. The issues remaining to be determined are:(a) The existing leasehold vacant possession values of the flats that have less than 5 years unexpired and which are not subject to lease-back.(b) Whether there is potential to undertake additional residential development on the roof; if so, whether there is a prospect of obtaining planning consent, and, if so, the value of that potential.(c) Hope value in respect of the 5 non-participating flats with terms of less than 80 years unexpired.(d) Deferment rate relating to those flats with less than 5 years unexpired.(e) Landlord's proposed terms of transfer.8. We undertook an inspection of the property and the immediate surrounding area on the afternoon of 6 April 2011. Following receipt of counsels' written closing arguments shortly after the hearing, additional submissions were sought as two further decisions where similar issues had been considered had been published: Cadogan v Erkman  UKUT 90 LC (consolidated cases LRA/56/2007 and LRA/68/2008) and Cadogan v Cadogan Square Ltd  UKUT 154 (LC) (consolidated cases LRA/128/2007 and LRA/17/2008). We subsequently sought further evidence and submissions relating to the deferment rate issue and these were all received by 13 September 2011. We consider the LVT's decisions, the evidence and submissions before us in this appeal, and provide our conclusions below on an issue by issue basis.Existing leasehold vacant possession values of flats 6, 9, 12, 13, 16 and 20: the parties' cases9. Before the LVT, Mr Roberts for the applicants (the appellants here) argued for a relativity to unimproved freehold values of 8%, and Mr McDonald, for the respondent nominee purchasers, sought 16.5%. Whilst the LVT stated that it preferred Mr Roberts's ``structured approach'' to the valuation exercise relating to leasehold vacant possession values, it adopted a relativity of 11.5% ,saying, in paragraph 133:``The relativity of flats with less than 5 years was dealt with in paragraph 3.7 of Einar Roberts, and Ronald McDonald's evidence at paragraph 7.5. Mr McDonald says he relied upon his knowledge and experience, however both valuers have considered this issue before at nearby Carlyle House, we consider the approach adopted in that case prudent and accept 11.5%.'' 10. It was the appellants' case that the LVT's conclusion was not based upon either party's evidence (although in its reasons for refusal of permission to appeal, it said that its conclusion was based upon an analysis of both parties' evidence), having used a relativity from another LVT decision without giving the parties an opportunity to comment (contrary to The Lands Tribunal's decision in Elmbirch Properties PLC's Appeal (2007) LRA/28/2006 (unreported)). They pointed out that in Arrowdell Ltd v Coniston Court (North) Hove Ltd  RVR 39 the Lands Tribunal (the President and NJ Rose FRICS) said this:``37. In our judgment leasehold valuation tribunal decisions on relativity are not inadmissible, but the mere percentage figure adopted in a particular case is of no evidential value.'' The appellants also relied upon Nailrile Ltd v Earl Cadogan  RVR 95 which applied the Arrowdell decision in this respect.11. Although neither party relied upon graphs of relativities, the appellants referred to Dependable Homes Ltd v Mann  UKUT 171 (LC), in which the tribunal rejected a graph compiled from LVT decisions and, in the absence of more satisfactory evidence, relied upon the ``graph of graphs''. Mr Munro pointed to the RICS Research Report: Leasehold Reform: Graphs of Relativity published in 2009 in which it said, at 4.6:``For leases with very short unexpired terms (say, under 5 - 10 years), the graphs may be found to be unreliable because, in most cases, they simply have a straight line from zero to the five year point. Most practitioners will establish this value by capitalising the rental value over the unexpired term. When valuing a lease with a short unexpired term, consideration needs to be given to any dilapidations obligation.''It was submitted that capitalising the rental value was precisely what Mr Roberts had done, and that his evidence was more satisfactory than that of Mr McDonald, who, in any event, was not contesting the LVT's decision despite having argued for a relativity that was 40% higher than that concluded by the LVT.12. Mr Roberts is a chartered surveyor with over 14 years experience in the profession and, acting for a number of the Great Estates, has specialised in leasehold reform matters particularly in central London and within the vicinity of the appeal property. He said that he had adopted the approach that his former colleague, Mr Roland Cullum FRICS, had used before the LVT in the case of 9-12 Carlyle House (LON/ENF/1429/05), where one of the four participating flats had a lease with only 6.5 years to run. That approach was to identify an unimproved rental value and capitalise it to the end of the term to arrive at the appropriate relativity. Although in the Carlyle House case there had been no unimproved evidence, such evidence was, he said, available here. Hence, whilst the approach was the same, the resultant relativity would be different.13. Mr Roberts analysed firstly a surrender of flat 4, Vale Court, a one bedroom unit with a gross internal area (GIA) of 540 sq ft which the Sloane Stanley Estate had taken back in early 2003. It had at the time an assured shorthold tenant (Mr Khan) who remained in occupation until February 2010. The Estate records showed that the flat needed a new bathroom and redecoration. In April 2007, close to the valuation date, the rent was renegotiated to £13,420 pa. Mr Roberts deducted 25% from that figure to give a net rent after the usual management costs of £10,065 pa, and capitalised it over 4.75 years on a dual-rate basis at a gross yield of 3.9%, with a sinking fund at 2.25% and tax at 30%. This produced a short leasehold value of £30,749 - say £31,000. That was a relativity to the agreed freehold unimproved value of £475,802 of less than 7%. Mr Roberts said that the 3.9% was a market rate (per the Savills PCL Index net yield for September 2007) and a proxy for a gross yield on a freehold investment of about 5%. The 25% deduction for costs was his realistic estimate of the estimated rental value on full repairing and insuring terms. The figures he had used, he said, were generous to the purchaser as the Savills PCL Index (which had been produced in evidence by Mr McDonald) showed gross to net ranging from 36% to 41%. He acknowledged that the rent that had been negotiated with the then existing tenant might have been less than could have been achieved in the open market, and it was for this reason, as well as all the other evidence he had relied upon, that he had used a relativity of 8% rather than the 6.5% that this particular analysis created.14. As a cross-check, Mr Roberts said that he carried out the same exercise on the open market lettings of flats 8 and 17 Vale Court. Allowing for the same £25,000 per unit for modernisation costs that had been adopted by the LVT (and he thought that this could reasonably equate to a dilapidations allowance, which needed to be taken into consideration where the lease was so short) his analysis produced relativities on each of 8%. The costs of modernisation were not, he said, challenged before the LVT, and on his understanding that flats 9 and 20 were in fair/tired condition he had assumed the other short leasehold units were also in need of upgrading. If the allowance was not made, then the relativity, using this approach, would amount to about 13%.15. Mr Roberts also considered a settlement in respect of the eight flats at 1-8 Carlyle House, which he had agreed with Mr McDonald in summer 2007. There the relativity was 17% on leases that had between 6.90 and 6.96 years unexpired, and this, on a straight line basis, might suggest a relativity of the Vale Court short leaseholds of around 11.5%. He said that he believed it was that valuation that the LVT relied upon in its determination on this case, but that was not the representation of either party and was a component in a wider settlement where there was a Delaforce effect in that the parties wished to avoid the costs and risks of tribunal proceedings. Furthermore, there was not sufficient unimproved evidence in that case to rely upon the capitalisation method.16. Mr Roberts then referred to contemporaneous evidence relating to the open market sale of the unenfranchisable interest in flat 3, Vale Court, an 840 sq ft unit, in October 2007 for £60,000 in, it was believed, `tired' condition. Whilst that sale was initially on the basis that the property was let, the tenant had left prior to exchange of contracts. This transaction showed a relativity of 8.63%. As to Mr McDonald's criticisms of the use of that sale as a comparable, Mr Roberts said he was happy to rely upon his own evidence, which had been verified in an email from Keith Pankhurst, the selling agent. That email had been before the LVT and Mr McDonald had had over two years in which to check out the information, but he had not done so.17. The type of purchaser who would be interested in a short leasehold would, Mr Roberts said, be ``property cognate'' individuals or investors - such as Mr Carey-Morgan - who were in it for short-term profit, buying short-term leases with Act rights that get exercised. Whilst he said that he understood where Mr McDonald was coming from in suggesting that there would be a special purchaser, he did not agree. Although it might on the face of it be an attractive proposition for, for instance, an overseas business person on a short term secondment, in that the purchase price would equate to a forward payment of a fixed rent, the potential for a large dilapidations bill, and possible protracted arguments in relation to it at the lease end would be a severe deterrent.18. Mr McDonald postulated an approach that assumed the leasehold value would be increased by what he described as ``the prospective shorthold tenant's bid'', although he produced no evidence in support. Whereas he had relied upon the ``graph of graphs'' at the LVT hearing in arguing for a relativity there of 16.5%, in respect of this appeal he undertook valuations of flats 3, 4, 8 and 17 (as Mr Roberts had done) but had not used dual rate tables. On flat 3, he took the gross rental value at £35,490 but only reduced it to a net figure by deducting service charge and insurance - pro-rated from another flat in Vale Court, no. 25. The deduction was thus £1,817 whereas Mr Roberts had deducted 25%. He then used a single rate multiplier of 5% and allowed (as Mr Roberts did) £25,000 for modernisation, but pro-rated it by floor area to give £24,376. A period of 6 weeks was allowed for the works, taking the reversion down to 4.5 years. This resulted in a relativity of 15.96%. Doing the same exercise on the other flats, again using pro-rated modernisation costs, he came to relativities of 16.52%, 14.81% and 17.84% to give an average of 16.28%. He then adopted the ``Carlyle House'' basis of using dual rate tables but retaining the deduction at £1,817. However, he did not make the 20% allowance for landlord's costs that he had previously done in that case. This produced an average of 11.68% which, he said, was close to the LVT's finding.19. In Mr McDonald's view, Mr Roberts had failed to allow for the possibility that the existing lease might be sold to a potential shorthold tenant on the basis of the improved security and effectively fixed rent. There was no reason to suppose, therefore, that it would only be investors who would bid. He said that he thought the LVT had been overly conservative in adopting an 11.5% relativity as his evidence supported between 15% and 16%.20. As to why he had not, in relation to Mr Roberts's evidence on flat 4, considered the email confirmation of the transaction details from Mr Pankhurst, Mr McDonald apologised for not having referred to it, and said, ``In reality I failed to pick up the relevance.'' He said that he had not thought that property was particularly relevant due to the low rent that had been passing before the tenant left, had not realised that it was actually being sold with vacant possession, and had not initially realised that it was an unenfranchisable lease.Existing leasehold vacant possession values of flats 6, 9, 12, 13, 16 and 20: conclusions21. We agree with the appellants' submissions regarding the evidential value of past LVT decisions in relation to relativity. The passage from Arrowdell that is referred to in paragraph 1 above continues: ``...The reason for this is that each tribunal decision is dependent on the evidence before it, and thus, in order to determine how much weight should be should be attached to the figure adopted in a decision, it would be necessary to investigate what evidence the leasehold valuation tribunal had before it and how it had treated it. Such a process of investigation is potentially lengthy, and it is inherently undesirable that leasehold valuation tribunal hearings should resolve themselves into re-hearings of earlier determinations.38. It is certainly understandable that valuers negotiating the settlement of an enfranchisement claim should have regard to leasehold valuation decisions on relativity, since these might seem to be the best guide of the likely outcome if they were unable to reach agreement, even though...the decisions are disparate and fail to show any established pattern. But the decisions themselves can constitute no useful evidence in subsequent proceedings.''22. The LVT's reliance on the figure adopted in Carlyle House was therefore in our view wrong, as it failed to comply with two of the ``three inescapable requirements'' referred to at paragraph 23 of the Arrowdell decision, where the Tribunal said:``... It is entirely appropriate that, as an expert Tribunal, an LVT should use its knowledge and experience to test, and if necessary, to reject evidence that is before it. But there are three inescapable requirements. Firstly, as a tribunal deciding issues between the parties, it must reach its decision on the basis of the evidence that is before it. Secondly, it must not reach a conclusion on the basis of evidence that has not been exposed to the parties for comment. Thirdly, it must give reasons for its decision.''23. Turning to the evidence, it is clear that Mr Roberts's methodology was appropriate and was undertaken in accordance with paragraph 4.6 of the RICS research document referred to above. The methodology adopted by Mr McDonald was on, we must say, a confusing basis and seemed to be designed entirely for the purpose of discrediting Mr Roberts's evidence. Mr Roberts pointed out that Mr McDonald's deduction only for service charge to take the gross rent to net ignored a number of important cost factors. Mr McDonald said in his report that residential units were never let on full repairing and insuring terms, that 25% was too high a reduction to reflect service charges, management and other costs, and that if his figures had been used, the relativity would come out at almost the same 11.5% figure that the LVT had determined. However, he accepted in cross-examination that he did not know whether the Savills PCL Indices included management costs, but thought it conceivable that they did. We prefer Mr Roberts's evidence. It is not, as Mr McDonald said ``a swingeing reduction'' but in our view fairly represents the level of costs that a purchaser would build in to the equation. Mr McDonald also said that it was inappropriate, in his analysis of the lettings of 8 and 17 Vale Court, for Mr Roberts to use the same £25,000 allowance for renovation costs on flats that were different sizes. Again, we do not concur. It seems to us to have been a fair ``ball-park'' figure (and one which the LVT accepted), and we do not think that it serves any useful purpose to break it down further.24. It is apposite to note here that Mr McDonald accepted in cross-examination that, if his method was not adopted, he could not object to Mr Roberts's methodology, and he also acknowledged that the LVT had rejected his earlier evidence. Hence his latest approach, which he also admitted, was ``novel''. Moreover the respondents have not challenged the LVT's decision, and it is difficult therefore to square his argument for somewhere in the region of 15 to 16.5% relativity with the LVT's adoption of 11.5%.25. We also note that in his closing submissions, Mr James McDonald said, ``None of the evidence produced for the Upper Chamber in anyway changed the situation put to the LVT, and I would invite the Upper Chamber to confirm the LVT decision on this point unchanged at 11.5%.'' We have already stated that the LVT was, in our judgment, wrong to rely upon information it had apparently taken from another case and, in the light of the evidence before us we are satisfied that Mr Roberts's opinion, formed as it is from a thorough analysis of comparables, is correct. We determine therefore that the relativity should be set at 8%. This conclusion is based upon the evidence before us in this case, and we have reached it on the basis that we have heard nothing to show that Mr Roberts's opinion was wrong. It needs to be said, we think, that the circumstances of this case are very different to those which prevailed in Cadogan v Cadogan Square Ltd  UKUT 154 (LC) (which we will refer to as 38 Cadogan Square), where the issue relating to leasehold values and relativities related to leases of 17.75 years unexpired and where deductions for Act rights had to me made. Reliance was also placed upon graphs, but here, as the RICS working group concluded, that is not appropriate on leases that have such short unexpired terms as those we are dealing with here. We do not think that any comparison can be drawn between the 42% of freehold value applied in 38 Cadogan Square (after deducting 25% for Act rights) and the 8% found here. It stands to reason that when a reversion becomes as short as 4.75 years, the value of unenfranchisable leases is rapidly approaching the stage where it becomes virtually nil.Development potential for additional storey: the LVT's decision26. Before the LVT the Trustees called evidence from Mr Christopher McCue of Paul Davis and Partners, architects, and from Mr Hayes on structural matters, Mr Oliver on planning and Mr Walker on conservation issues. Their case, as it was put in the decision, was that on the basis of this evidence there was potential to develop the roof using various alternatives, including the addition of a penthouse, and that the potential to realise this development value ought properly to be reflected in the price paid by the nominee purchaser. Mr Roberts gave evidence that the highest value scheme, allowing for a planning risk of 50%, would give a development value of £838,125.27. The nominee purchasers produced to the LVT a letter of 15 July 2008 from Mr Bruce Coey, area planning officer with the council, written in response to a request by an architect instructed by them that he should confirm the opinion he had expressed on the possibility of building an additional storey on Vale House. The letter said:``The property is located within the Chelsea Park/ Carlyle Conservation Area, for which the Council published a proposals statement in 1993. The relevant policies towards additional storeys which are set out in the Unitary Development Plan are CD44 and CD45, and those towards development in Conservation areas CD57, CD61 and CD62. The overall requirement for development in Conservation Areas is that it preserves or enhances their character or appearance.I would advise you that the erection of an additional storey at this property, by rising above the roofline of Mallord Street, and by adding significant bulk to a mansion block of flats, would not comply with Policy CD44. Furthermore, the Conservation Area Proposals statement advises that there is a general presumption against additional storeys throughout the Conservation Area because of the effect that these would have on the townscape of the area. The map on page 55 of the statement examines every property in the Conservation Area that is suitable for any form of roof addition and does not identify Vale House as being an exception to this general policy. I would accordingly advise that an additional storey would not preserve or enhance the character or appearance of the Conservation area and would infringe policies CD57, CD61 and CD62.''28. Following the production of this letter the LVT permitted the trustees to call Mr Greenish to give evidence. His witness statement, dated 27 October 2008, dealt with a question that the tribunal had asked during the early stages of the hearing, namely why the applicant had never submitted a planning application for any of the four schemes that had been produced in evidence. The statement also addressed some of the points made in Mr Carey-Morgan's witness statement. Mr Greenish said that the subject of a roof extension over Vale Court (and over Tryon House, which lies on the other side of the telephone exchange) in conjunction with a residential refurbishment of the exchange had first arisen in 2006 when the Estate's agents had suggested that a case for this could be made. Sketch plans (which were different from those that were before the LVT and this Tribunal) were produced by Paul Davis and Partners, and they, together with representatives of Gerald Eve, attended a meeting with the council's planning department on 30 October 2006 to obtain an initial reaction as to the likelihood of a planning application being successful. A note of the meeting (which had been prepared by Gerald Eve) was appended to the witness statement.29. The note of the meeting of 30 October 2006 recorded the following (``GO'' is Mr Oliver; ``NB'' is Mr Nick Booth, described as ``Development Control, RBKC''; ``AH'' is Mr Alec Howard of Paul Davis and Partners; and ``AW'' is Mr Alan Wito, described as ``Conservation, RBKC''):`` Introduction1. GO introduced the sketch drawings tabled to RBKC for a roof extension across Vale and Tryon House. Drawings show single storey extension set back from the existing roof line. Sight lines show no visibility from Mallord Street. Internal layout plans show options for 1 and 2 residential units.2 Initial comments3 NB explained that within the Chelsea Park/ Carlyle Conservation Area there is a general presumption against all roof top extensions.4 In other conservation areas there is an element of flexibility but in this area all buildings are considered to have a roof structure or form of historic interest which should be retained.5 Initial comments from NB were that:· The existing building is already significantly higher than the majority of the buildings on the street;· In terms of impact of an extension on the surrounding area consideration will be given to visibility from surrounding buildings as well as ground level;· Any extension on these buildings is likely to be visible and considered over dominant;· Particular concern in respect of impact of an extension on Vale house and the impact on The Vale;· While the provision of two additional residential units would be viewed positively in land uses terms it is unlikely that this alone would be sufficient to override restrictions on roof level extensions.6 GO raised the issue of a potential package of environmental improvements measures to off set against the proposals, as identified within the Chelsea Park and Carlyle conservation Area statement.7 NB advised that whilst improving the attractiveness of the area as part of a package of improvements provides an argument this is unlikely to outweigh the Councils policy presumption against rooftop extensions.8 Based on proposals to date, AW considered that the extension would have an impact on the character of the conservation area and the presumption would be against a roof top extension on these buildings.9 Alternative options: Contemporary design approach10 GO suggested the option of a contemporary high quality design creating a visible extension rather than a design which seeks to reduce visibility and impact.11 AH identified that such an approach had been taken with a roof extension at Lowndes Square and also at the Duke of York's site where a lightweight glass roof structure was introduced across the extent of the terrace.12 AW considered that due to the design of the terrace (Telephone Exchange between Vale and Tryon House creating three defined buildings) a contemporary extension each side of the Telephone Exchange would not be in keeping with the whole terrace.13 AW considered that an extension set back from the existing roofline would appear contrived while a mansard extension to the existing roofline would be over dominant.14 GO raised the issues of a holistic approach to the roofline to include the Telephone Exchange. This could improve the overall rooftop across the three buildings15 General concern from AW that an extension across the three buildings would need to including substantial benefits in terms of land use, improvements to the design of the buildings and wider environmental improvements to override restrictions on roof level extensions.16 Conclusions17 Initial view of both NB and AW that:· any extension at roof level would be resisted on the basis of detrimental impact on the character of the conservation area.· Due to the nature of design of the three buildings unsure that a contemporary design on Vale and Tryon would be suitable.· Such [proposals would need to be in conjunction with substantial environmental and land use gains.18 NB concluded that he would carry out a site visit in order to fully understand the potential impact on the surrounding area.''30. In its decision (at paragraphs 81 and 82) the LVT said that an investor, looking at the development potential of the roof, would be concerned about almost certain appeals, delays, cost and an outcome that was said to be 60% certain. The residual valuations that Mr Roberts had given might to an investor seem unreliable, as they were based on final values. The investor would know that the discussions that both applicants and respondents had had with the council suggested that planning permission would be refused, and the tribunal's own inspection and consideration of the planning evidence suggested that there would be considerable local opposition to such proposals. It considered that a ``cautious and prudent investor'' would reject a residual valuation as too unreliable and would rely on their instinct and knowledge of the market and would allow no more than £10,000 for the prospect.Development potential for additional storey: the parties' cases31. The appellants' case was that the LVT must, by implication, have accepted that there was potential for some form of development on the roof of Vale Court in concluding that something would be paid for it; and that it had been wrong to reject all of the evidence that had been called by the appellants and to choose a figure of its own based upon what it thought a ``cautious and prudent investor'' would pay. Whilst accepting that it was likely that this Tribunal would find that ``the hypothetical purchaser is prudent rather than rash'' (see 31 Cadogan Square Freehold Ltd v Cadogan  UKUT 321 (LC)), Mr Munro said that the LVT had adopted the wrong test if it was intended to add anything to ``prudent''. Although the LVT had said at paragraph 70 of its decision that it adopted the test of an informed purchaser, it had not, in fact, done so. In Phillips v Brewin Dolphin Bell Lawrie Ltd  1 WLR 143, Lord Scott said, at para 30:``The value of an asset that is being offered for sale is, prima facie, not less than the amount that a reasonably informed purchaser is prepared, in arms length negotiations, to pay for it.'' That, it was submitted, was the appropriate test. The purchaser would have no more, and probably less, material upon which to make a value judgement than had been produced before the LVT (and was reproduced before us), whereas the LVT appeared to have assumed that he would have perfect knowledge and would have access to all the material that a building owner would have obtained by the time he entered into a contract for the proposed works to be undertaken. It was not the Tribunal's function to put itself in the position of a planning committee determining an application, but to consider the approach that a hypothetical purchaser would take in weighing up the difficulties that might be encountered in achieving further development, both in terms of physical and economic factors, and in planning prospects. 32. Mr Munro contended that it was wrong for the LVT to have rejected the planning evidence and opinion that had been provided by Mr Oliver, and the views, on conservation matters, of Mr Walker. There was no possible foundation, it was submitted, for the LVT to find that there would be ``considerable local opposition to raising the roof from all sides''. In inviting the Tribunal to conclude that on the basis of their evidence, which was based upon potential schemes drawn up by Mr Chris McCue of architects Paul Davis & Partners (PDP), and, in terms of which the detail was not thought to be controversial, there was potential to obtain planning permission for, and to be able physically to construct, a penthouse flat on top of the building. Mr Munro pointed out that no planning evidence had been tendered by the respondents, and that Mr McDonald, who was not a planning expert, had simply concluded that planning consent would not have been forthcoming, and had not suggested any other potential impediment to the proposals. It was submitted that the research that Mr Carey-Morgan had undertaken in getting HUB Architects, at a cost of only about £282, to write to the council and ask for their response to the idea of an additional floor was wholly inadequate, in relation to what a serious prospective purchaser could be expected to do, and the negative answer from the planning office was entirely predictable. Mr Carey-Morgan was wrong when he suggested that there had been an earlier application for rooftop development on the building.33. On the basis that a prospective purchaser would have sought and obtained the type of advice that had been provided by the appellants' experts, Mr Munro submitted that he would have been confident in offering a price that included the value that Mr Roberts had ascribed to the potential - a figure that reflected an extremely cautious view, as it allowed only 45% for site value and a planning risk deduction of 50%.34. Four schemes had been prepared by Mr McCue in connection with the LVT application, and upon which the experts based their evidence. In order of value potential they were: (1) a contemporary style penthouse flat of about 1,915 sq ft, having access from the top floor of the adjoining telephone exchange building which was, and is, within the ownership of the appellant, and which it proposed eventually to convert into high class residential apartments, with lift access to all floors; (2) two self contained flats having access from the main staircase of Vale Court (and referred to as ``walk-ups); (3) a roof terrace to serve the new telephone exchange flats; and (4) a roof terrace solely for the use of the present flats in Vale Court. At the hearing before us the appellant recognised that the primary focus should be on the penthouse option. It was submitted that the respondents had not challenged the structural engineer's or quantity surveyor's evidence, and that there had been no specific opposition to the details of the schemes. The respondents' only argument had been that planning consent would not be forthcoming.35. Mr Greenish is senior partner of Pemberton Greenish, the appellants' solicitors, and is a trustee of the Sloane Stanley Estate. He said that the preferred scheme (the penthouse flat) involved creating an access through the telephone exchange which was let to British Telecommunications PLC on a lease expiring on 25 December 2012. There was a real risk, therefore, that if planning permission had been successfully sought when the question of redevelopment with residential units was first mooted, it would have expired by the time vacant possession was obtained. Furthermore, if the lessee of the telephone exchange had got wind of the application (which they undoubtedly would have done), they would have been very likely to exercise their rights either under the Landlord and Tenant Act 1954 or the Telecommunications Acts, if only to negotiate a payment to persuade them to give vacant possession.36. In any event, Mr Greenish said, even prior to the serving of a section 13 notice it could have been anticipated that the lessees of Vale Court would seek to enfranchise, and in such circumstances any planning consent would be useless to the applicants, and the considerable costs involved in submitting an application (and possibly an appeal) would have been wasted. Although the costs incurred in obtaining the evidence needed to support the applicant's contentions before the LVT (and subsequently this Tribunal) were significant, they were nowhere near the level that would apply in undertaking a full planning exercise. Mr Greenish said that knowing how long it would take to go through the planning process, especially if an appeal was necessary, even if an application had been made as soon as the section 13 notice was served, there would have been no realistic possibility of obtaining a consent before the LVT hearing.37. Mr Greenish said that seeking planning permission for this development was not one of the Estate's priorities, particularly as it was not known what BT's long-term plans for their occupation of the telephone exchange were. Without vacant possession, and redevelopment of the telephone exchange, the penthouse proposal on Vale Court could not proceed. That was the most valuable option, and it was acknowledged that Mr McCue's other three proposals would provide significantly smaller returns. Mr Greenish said that, since the LVT decision, a new lease had been granted to BT on 9 April 2010, outside the provisions of sections 24-28 of the 1954 Act, and expiring on 28 September 2015. It contained a tenant's break clause that could be exercised at any time after 25 December 2012 upon giving 6 months notice, but it was submitted that this new lease arrangement had no bearing on the issues in this appeal.38. Mr Hayes is Principal of Michael Barclay Partnership LLP, a central London firm of consulting engineers. He said that his firm had been asked to provide a preliminary structural overview as to the viability of constructing penthouse apartments on the roof of Vale Court. They had carried out an external inspection of the property, and from within the communal areas and upon the roof, but had not undertaken any form of structural survey. He included in his report the caveat that the relationship of any new building work to the existing structure would need to be assessed and the impact of any new loads upon the existing structure evaluated. He gave examples of central London properties that had undergone similar rooftop developments, suggested that a lightweight structural frame (as had been used in a new penthouse constructed on a building in Lowndes Square), would be the most obvious solution, and described the construction and sequencing processes which by judicious use of the framing and load distribution would ensure that occupiers of the existing top-floor units would not need to vacate.39. Mr Hayes said in cross-examination that he did not think that the difference in levels between the telephone exchange floors and the roof level at Vale Court would create any structural difficulties, but he accepted that he had not considered that aspect in detail or any likely related costs.40. Mr Oliver is a member of the Royal Town Planning Institute and a partner in Gerald Eve. He advises various London Estates on planning matters generally, has acted for the appellant for over 8 years in respect of properties in the vicinity of Vale Court and has dealt with the Royal Borough of Kensington and Chelsea throughout his professional career. He said he had been asked to advise as to the prospects of obtaining planning permission for any of the four schemes that had been prepared by Mr McCue. He described Vale Court. It was situated in the Chelsea Park Conservation Area but was not a listed building. The immediate surroundings, apart from the adjoining telephone exchange, were predominantly residential and comprised buildings of varying scale, height and mass in a range of architectural styles. The roofscapes in Mallord Street and The Vale were, he said, of varying form, style and building materials, including roofs with gables and pediments, mansard styles with and without dormer windows, pitched and flat roofs. The telephone exchange, being a commercial unit, had floor to ceiling heights significantly greater than the surrounding residential properties, and it had a roofline which rose well above the adjoining units, making it a dominant feature in the streetscape. There were mature London plane trees along the return frontage of Vale Court to The Vale, and the foliage served to restrict views of the building from the street and the Kings Road. The properties to the rear of Vale Court fronting onto Kings Road tended to be lower in height and had rooftop amenity areas and terraces.41. At the valuation date, the council, in considering any planning application for residential development, would have had regard to the relevant policies in the London Plan, adopted in 2008, and the ``saved policies'' of the Royal Borough of Kensington and Chelsea Unitary Development Plan, adopted 25 May 2002 (the UDP). In particular, Policy H2 in the Housing Chapter of the UDP seeks the development of land and buildings for residential use and, within the Conservation and Design Chapter, policy CD27 seeks a high standard of development, sensitive to and compatible with the scale, height, bulk, materials and character of the surroundings; CD28 requires development to be physically and visually integrated into its surroundings; CD33 seeks to resist development that would significantly reduce sunlight/daylight to adjoining buildings and amenity spaces; CD35 requires design to ensure sufficient visual privacy for surrounding residents, and CD36 resists development that will result in a harmful increase to the sense of enclosure to nearby residential property.42. Of specific relevance to either of the residential alternatives that had been proposed, policy CD44 states:``To resist additional storage and roof level alterations on:a. complete terraces and groups of buildings where the existing roofline is unimpaired by extension, even when a proposal involves adding to the whole terrace or group as a co-ordinated design;b. buildings or terraces that already have an additional storey or mansard;c. buildings that include a roof structure or form of historic or architectural interest;d. buildings which are higher than surrounding neighbours;e. buildings or terraces where the roofline or party walls are exposed to long views from public spaces, and where they would have an intrusive impact on that view or would impede the view of an important building or open space beyond;f. buildings which, by the nature of the roof construction and architectural style are unsuitable floor roof additions, e.g. pitched roofs with eaves;g. mansion blocks of flats where an additional storey would add significantly to the bulk or unbalance the architectural composition;h. terraces which are already broken only be isolated roof additions.'' Policy CD45 states:``To permit additional storeys and roof level alterations in the following circumstances:a. where the character of a terrace or group of properties has been severely compromised by a variety of roof extensions and where anything in between would help to reunite the group; andb. the alterations are architecturally sympathetic to the age and character of the building and would not harm its appearance.''And in respect of the roof terrace proposals, Policy CD46 states:To resist the introduction of roof terraces if:a. significant overlooking of, or disturbance to neighbouring properties or gardens would result; orb. any accompanying alterations or roof alterations are not to a satisfactory design, would be visually intrusive or would harm the street scene.''43. Mr Oliver also referred to the Chelsea Park Carlyle Conservation Area Proposal Statement of September 1992 where, at page 38, its guidance said:``There is a general presumption against proposals for the additional storeys, roof extensions, roof alterations and attic conversions throughout the conservation area because of the effect these would have on the character of the area. All buildings in the area are identified as including roof structures of architectural interest on which additional storeys will be resisted under the Council's restrictive planning policies.'' 44. In respect of the appellants' now preferred option (of the four he had originally considered), Mr Oliver said firstly that, in connection with a residential redevelopment of the telephone exchange, the current use of that building was sui generis and, furthermore, it was a very small employer with, apparently, only a handful of workers operating in that building. This would not therefore, in his opinion, be an employment use that the council would seek to protect. He had also been involved with the change of use to residential of the former telephone exchange at 21-24 Chesham Place, Belgravia, where the same land use policies apply and there had been no objection to loss of that use. He did not therefore agree with the respondents' assertions that the proposal for a residential unit above Vale Court, with access from the telephone exchange must therefore be doomed to failure. There was also a clear priority in the UDP for additional residential accommodation in the area (Policy H2).45. Similarly the provision of a new residential unit (or units if the two walk-ups were economically viable) on top of Vale Court would be wholly consistent with this policy. As to design, it was his view that neither of the proposals fell within any of the 8 categories where extensions should be resisted (Policy CD44). Criterion (a) was not relevant as this property did not form part of a complete terrace or group of buildings. The existing building did not already have an additional storey (b), or include any form of interesting or architecturally merited roof structure (c), and the height was lower than the adjacent telephone exchange (d). Mr Walker had assessed the impact the development would have on views as minimal (e), the flat roof was entirely appropriate for an additional storey, being currently cluttered and unattractive in appearance (f), and there would be no significant addition to the bulk or architectural composition of the building (g) as the design was such that the penthouse or flats would be set well back behind the parapet. The building was also not located in a terrace that was already broken by isolated roof additions (h). 46. The proposals accorded, he said, with policy CD45 in that the development would be architecturally sympathetic to the age and character of the building, and would not harm its appearance. He produced a series of photographs of the building taken from street level at a number of locations, with the outline of the proposed penthouse added. It was evident from these, he said, that particularly in the summer, it would be virtually invisible. He acknowledged that they had not been available to the planning officer at the meeting of 30 October 2006 that he had attended, to which Mr Greenish had referred. He said that he did not think that Mr Nick Booth, the council's development control officer, who had been in attendance at that meeting, had visited the property. Having given some examples of other developments that had been permitted in the area (including particularly 25-39 Thurloe Street), which had been permitted in accordance with the relevant policies, Mr Oliver said he thought this particular roofscape would benefit from tidying up. At present the flat roof contained a variety of utilitarian structures such as chimneys (which would remain), roof access area, water tanks and aerials. Such an extension would achieve that aim, and whilst there was a general presumption against proposals for additional storeys within the conservation area, the benefits that he had outlined would make a strong case for permission being granted in the circumstances.47. In connection with policy CD46, the development would be virtually invisible from the ground, and in terms of overlooking other properties, the option to provide planters at the back (looking towards the Kings Road properties) and at the edge of the small balcony to the front, would resolve any issues in that regard. He said he did not agree with the LVT's conclusion that either a penthouse or two self-contained flats would overlook other properties or their roof terraces. In his second supplemental report, he said that the only properties that might realistically be overlooked were No 2 The Vale and the roof terraces to 342-346 Kings Road. However, given the close proximity of existing buildings generally, it was necessary to consider whether any additional overlooking from this development would be significant.48. Although Mr Oliver acknowledged that the indicative elevations of the proposed development were contemporary in design, and thus not precisely in keeping with the existing design and character of the area, he said that they had the benefit of being simple and not visually intrusive. In his view, the indicative drawings that had been provided by PDP (his appendices GO11, GO12 and the identified key views in GO15) would be in accordance with policies which seek high quality design and which reflect the development's context, and would enhance the conservation area. In any event, he said, the precise design was something that would be sorted out through discussions with the planners. In that regard, he accepted in cross-examination that none of these proposals had been put to or discussed with the planners, and the opinions expressed were solely his own. It was possible, therefore, that the reaction of the council's development control officer could well be the same as had been the case at the 30 October 2006 meeting, although in this case there were plans, whereas in the initial meeting there were not.49. Mr Oliver said in cross-examination that he thought there was, realistically, a 60% to 70% chance of obtaining permission for another storey, and a slightly higher chance of getting consent for a roof terrace or garden. He accepted that it was most likely that, if permission were to be granted, it would be on appeal, and that an initial application would be refused. In response to questions from the Tribunal, Mr Oliver said that, in planning terms, the proposal for two flats might have a slightly better chance than a single penthouse as there was a greater gain in terms of an additional residential unit. 50. In answer to us Mr Oliver said that the planning permissions he had produced for roof extensions on properties in Thurloe Street and King's Road were the only ones that he was aware of. He had not sought to establish what refusals of permission there had been for such proposals in the area or what decisions there had been on appeal.51. Mr Walker is a chartered architect and a founding partner of DLG Architects, to which he is now a consultant, and specialises in building conservation, lecturing on the subject at the Architectural Association and universities. He has extensive experience in preparing conservation assessments (including those relating to roof-top developments), is a resident of the Royal Borough and is chairman of the local conservation association. He said that he had been asked to assess the PDP proposals in respect of conservation issues, and the likelihood of obtaining planning consent from the conservation perspective. His report set out in considerable detail the history and background to development in the area and summarised national and local policies. In the local UDP, policies CD44 and CD45 were the most relevant, and he said that it was clear that the main interest was in terraces of buildings where a consistent approach to roof extensions was important in preserving the interest of the group. That was not, he said, the case with Vale Court.52. The Chelsea Park Carlyle Conservation Area Proposals Statement from 1992 provided a comprehensive examination of the area, Mr Walker said, and he described the make-up and historical styles of The Vale, Mallord Street and Mulberry Walk. The area was ``mixed'' and Mallord Street was more ``accidental'' or random and contained flats that were out of character with the general trend in the area, together with a telephone exchange which was interesting in its own right and ``offered opportunities to improve the appearance, specifically in respect of the floorscape in front of the building.'' Mr Walker said that the statement mentioned clutter on roofs, including aerials and other impedimenta, and that works to roof were dealt with as a specific issue. The problems of arbitrary changes of style, for example from simple eaves to mansard, could have a fundamental impact on appearance. For that reason, the statement considered that all the buildings in the area had a roof structure or form of historic or architectural interest, and there was thus a general presumption against additional storeys. However, Mr Walker said that in spite of this it was acknowledged that there were individual reasons for permitting or even encouraging additional storeys, and the statement set out some examples. 53. Mr Walker said that Vale Court, as acknowledged in the statement, provided a different type of accommodation to that in the rest of the area and was adjacent to one of the tallest buildings (the telephone exchange). He went on to describe its appearance from various vantage points and the impact that he thought the extension as proposed would have. He said that the view along Mallord Street from the east gave a very oblique view of the building and demonstrated its importance in providing a transition between the telephone exchange and the listed buildings on the west side of The Vale. By setting the extension back behind the top of Vale Court's frontage walls this relationship was preserved. Furthermore, it would not impinge on the view of any of the listed buildings or adversely affect their setting. From the north, in The Vale, the building was extremely well shielded by trees, even in winter. From closer up, the face of the building (which would not be changed) could be seen, but the proposed extension would soften the transition between Vale Court and the telephone exchange, which was currently crude. From Paulton's Square (on the other side of the Kings Road) the existing building, he said, formed a disruptive background to the Kings Road frontages, and the extension would help to provide a more unifying background. The further away from the building that one got, the less the impact of any development.54. Mr Walker said that the elevational treatment as proposed would ensure that the existing elevations retain their proportion and composition. It would provide a simple, contemporary, form that was part of the managed evolution of conservation areas advocated in PPG15, would continue the tradition which is apparent in this part of the conservation area and would add to the richness of it.55. Whilst accepting the general presumption against roof extensions in the area, Mr Walker said that as Vale Court did not fall into one of the categories of buildings referred to in Policy CD44, an application for an extension in this location should, and would, be judged on its own merits. Similarly, there was compliance with Policy CD45, as the proposal would not harm the appearance of the building, and would, in fact, enhance the balance of the roofscape. No harm would be occasioned to the setting of the nearby listed buildings, and the development would be of an appropriate scale.56. In his view there would be a realistic prospect of planning consent being obtained, but in the knowledge that the conservation officer would be likely to object, and the planning officer for the council might place more emphasis on the general presumption against, and rely upon the blanket conservation area statement, an initial refusal could be anticipated. However, in his opinion an inspector on appeal would be more sympathetic. He said that planning permission had been granted on appeal for the construction of two rooftop flats on an existing mansion block, Melbury Court, Kensington High Street. In the light of that success (for the applicant in that case), the council had subsequently granted planning permission for a similar development at Leonard Court, Edwardes Square W8. Mr Walker also referred to the fact that very contemporary rooftop developments had been permitted on 13, 14 and 15 Bedford Square WC1, which were Grade 1 listed buildings. He thought that, in respect of Vale Court, the chances of obtaining permission on appeal were ``substantially greater than evens...
To continue readingREQUEST YOUR TRIAL