The Sloane Stanley Estate v Morgan & Anor, Court of Appeal - Lands Tribunal, October 10, 2011, [2011] UKUT 415 (LC)

Resolution Date:October 10, 2011
Issuing Organization:Lands Tribunal
Actores:The Sloane Stanley Estate v Morgan & Anor
 
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12© CROWN COPYRIGHT 20111UPPER TRIBUNAL (LANDS CHAMBER)UT Neutral citation number: [2011] 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 [2010] 1 AC 226; [2007] EWCA Civ 1042Cadogan Square Properties Ltd and Others v Earl Cadogan [2010] UKUT 427 (LC)Cadogan v Erkman [2011] UKUT 90 LCCadogan v Cadogan Square Ltd [2011] UKUT 154 (LC)Culley v Daejan Properties Ltd [2009] UKUT 168 (LC)The following cases were also referred to in argument:Arbib v Earl Cadogan [2005] 3 EGLR 13931 Cadogan Square Ltd v Earl Cadogan [2010] UKUT 321 (LC)Arrowdell v Coniston Court (North) Hove Ltd [2007] RVR 39Nailrile Ltd v Earl Cadogan [2009] RVR 95Phillips v Brewin Dolphin Bell Lawrie Ltd [2001] 1 WLR 143Dependable Homes Ltd v Mann [2009] 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 [2010] 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 [2011] UKUT 90 LC (consolidated cases LRA/56/2007 and LRA/68/2008) and Cadogan v Cadogan Square Ltd [2011] 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 [2007] 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 [2009] 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 [2009] 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...

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