In Properties AY&U Ltd v Barham House Freehold Ltd [2022] UKUT 231 (LC); [2022] PLSCS 142, the Upper Tribunal (Lands Chamber) has echoed the Court of Appeal in Mundy v Trustees of Sloane Stanley Estate [2018] EWCA Civ 35; [2018] EGLR 7 as to the approach to be adopted in respect of appeals relating to issues of valuation.
Barham House, Molyneux Street, London W1 was a purpose built block of flats. In February 2020 the appellant purchased the freehold interest in the building for the sum of £91,000, at auction. The guide price was £15,000. Following its acquisition, the appellant sought pre-application planning advice with regard to the likelihood of obtaining planning consent for the creation of basement and rooftop flats. The advice received was that permission for the proposed rooftop extension would be refused. The basement development was likely to be considered acceptable subject to compliance with design standards.
In June 2020 the respondent nominee purchaser gave notice pursuant to section 13 of the Leasehold Reform, Housing and Urban Development Act 1993, exercising the right to acquire the freehold of the building on behalf of the leaseholders. The premium offered was £18,000. The parties were unable to agree the premium payable for the freehold. The matter was referred to the First-tier Tribunal for determination.
Before the FTT, the respondent’s valuation expert argued that the maximum price that could be realised on the open market for the hope value was £10,000. The appellant’s expert argued that the residual value was in excess of £1.2 million due to the possibility of obtaining planning permission for the development of the basement and the rooftop flats. The respondent’s expert explained that his report was silent as to the auction sale price because it was not a material factor.
The FTT determined that the premium payable under section 24 was £30,000. This sum represented the agreed sum of £19,000 for the value of the reversion to the lesses, £10,000 hope value and £1,000 for the value of the appurtenances.
On appeal, the appellant argued that the FTT had failed to provide reasons as to why the price achieved at auction was not a reliable indicator of the market value of the freehold. The UT disagreed. It observed that the FTT had concluded that the residual valuation provided by the respondent’s expert was “not a reliable basis upon which to assess the premium” by having regard to the pre-application planning advice and the speculative nature of any development opportunity. Further, the appellant’s own expert had considered the auction price not to be a significant factor in setting the minimum price payable for the premium, which the FTT had duly noted.
The UT provided a useful steer on how valuation issues should be approached by the FTT and on appeal. Firstly, the UT observed that since its establishment, its practice when hearing appeals from the FTT was for the same to be by way of a review unless, exceptionally, a re-hearing had been directed. In cases where valuation was in issue, in light of the UT’s specialist expertise in this field, it would be marginally more inclined to direct a re-hearing.
Secondly, the FTT was not obliged to arrive at a valuation based on the open market value established by the auction price. Determination of the open market value of a property on a particular valuation date was a matter of valuation judgment. It was a question of fact and not law.
Lastly, relying on Mundy the UT found that valuation issues were issues of fact, and although appeals to the UT could be submitted on a point of law, they could only be submitted in such cases where the decision was “perverse”. There was no such error in the FTT’s approach in the present case.
Elizabeth Dwomoh is a barrister at Lamb Chambers
