Leasehold Reform, Housing and Urban Development Act 1993 — Acquisition of block of flats — Determination of price — Whether any value in right to receive insurance commission
The appellant
was the freehold owner of a block of 12 flats let on leases for terms of 99
years from March 25 1975 at rising ground rents. Under the leases the landlord
was obliged, inter alia, to insure the premises against certain risks,
and was entitled to recover the premiums under the service charge provisions.
Nine of the lessees gave notice to acquire the freehold under the Leasehold
Reform, Housing and Urban Development Act 1993. The appellant appealed the
decision of the West Midlands Leasehold Valuation Tribunal, that the price
payable should be £11,750, contending that the price should include the value
of the right to receive commission on the insurance premiums amounting to an
additional £2,032.20.
cost of the insurance premiums under the service charge provisions without
having to deduct any insurance commission earned. The price which would be paid
for the freehold in the hypothetical circumstances under the 1993 Act would
include an element to reflect the expectation of the receipt of insurance
commission. Where there is no evidence of sales of comparable properties, which
would reflect any element of value attributable to the expectation of the
receipt of insurance commission, the value of any insurance commission must be
considered separately from the value of ground rental income. A YP of 8.5,
equivalent to a yield of 11.76%, was appropriate which when applied to an
annual commission of £101.61 gave an addition to the price of £863.68
The following
case is referred to in this report.
Castlebeg
Investments (Jersey) Ltd v Lynch (1988) 57
P&CR 493, LT
Malcolm Bruce
Pennycuick FRICS appeared for the appellants; Brian Poultney, solicitor
(instructed by Colley & Tilley) represented the respondents.
Giving his
decision, MR M ST J HOPPER said: This is an appeal by Blackstone
Investments Ltd (the appellants) from a decision of the West Midlands Leasehold
Valuation Tribunal (LVT) determining the price to be paid by Middleton-Dell
Management Co Ltd (the respondents) for the freehold interest in a block of
flats known as The Dell, 125–127 Middleton Hall Road, Kings Norton, Birmingham
(the subject property), under the provisions of section 24 of the Leasehold
Reform, Housing and Urban Development Act 1993 (the 1993 Act) in the amount of
£11,750.
Mr Malcolm
Pennycuick [FRICS] is a director
of the appellant company; he appeared on their behalf and gave evidence; Mr
Brian Poultney appeared for the respondents.
From
documentary evidence produced, and oral evidence given, at the hearing I find
the following facts:
1. The subject
property comprises a single three-storey block of 12 flats constructed in about
1962 with brick walls and a flat roof.
2. The
freehold interest in the subject property is owned by the appellants; the
individual flats are let on leases for terms of 99 years from March 25 1975 at
rent of £25 pa for the first 25 years, £50 pa for the next 25 years, £75 pa for
the next 25 years and £100 pa thereafter. Under the provisions of the leases,
first, the lessor is liable ‘to insure and keep insured in the full replacement
value the Building and Lessor’s fixtures therein against loss or damage or fire
and such other risks as the Lessors should deem desirable or expedient in some
insurance office, or with underwriters of repute’; second, the lessees are
liable ‘to pay to the Lessors without any deduction by way of further and
additional rent a proportionate part of the expenses and outgoings incurred by
the Lessors in the repair, maintenance, renewal and insurance of the Building
and the provision of services therein and the other heads of expenditure as the
same are set out in the Fourth Schedule … (hereinafter called the service
charge)’; the fourth schedule includes a reference to ‘the cost of insuring and
keeping insured throughout the term hereby created the Building and all parts
thereof the Landlord’s fixtures and fittings therein and all the appurtenances,
apparatus and other things thereto belonging …’.
3. Nine of the
lessees qualified under the 1993 Act gave initial notice to purchase the freehold
interest in the subject property in April 1994, although only eight of the
lessees served the notice. The respondents admitted that the participating
lessees were entitled to exercise a right to collective enfranchisement, but
the price was not agreed.
4. The
disputed price was the subject of a reference to the West Midlands LVT which
heard the parties on May 25 1995 and by a decision dated July 5 1995 determined
the price at £11,750. They attached to their decision details of the valuation
by which they arrived at the price which, summarised, was as follows:
|
|
£ |
|
|
(a) Value of the rent |
5,383.10 |
|
|
(b) Value of the reversion |
92.34 |
|
|
(c) Shared marriage value |
6,262.28 |
|
|
(d) Compensation for loss of management and insurance commission |
Nil |
|
|
|
11,737.72 |
|
|
Say |
11,750.00 |
|
5. The
appellants accept the price determined by the LVT, except its exclusion of the
value of the potential receipt of insurance commission which they quantify at
£2,032.20.
6. Mr
Pennycuick owns all the shares in the appellant company, which employs as
managing agents for the subject property, a partnership known as Pennycuick
& Brown. The appellants contract for the insurance of the subject property
as required under the flat leases through brokers known as White Hart Insurance
Agency (White
7. White Hart
arrange insurance cover for three other blocks of flats owned by the appellants
and a number of other blocks of flats owned by other owners. On behalf of all
their clients they insure the buildings concerned with Royal Insurance Co at
premiums which are discounted by 70%, because of the large amount of insurance
involved. The benefit of this discount is passed on, inter alia, to the
lessees of the flats in the subject property; plant and machinery in the
relevant buildings is separately insured with Vulcan Insurance Co; no discount
is obtained upon the premiums relating to plant and machinery. Both insurance
companies pay commission on the total of the premiums of all the blocks insured
through White Hart in the amount of 15% of the premiums payable, after the 70%
discount in the case of the building insurance. The appellants allow White Hart
to retain the commission in respect of the subject property.
Appellants’
case
Mr Pennycuick
said that, in their decision, the LVT suggested that, although the appellants
had the advantage of the commission arrangement, it would seem to be a personal
circumstance which must be disregarded for valuation purposes. This matter had
not been discussed at the hearing and Mr Pennycuick had not therefore been able
to make any representations about it.
This had been
the first case to be heard by West Midlands LVT under the 1993 Act and quite
rightly the matter had been approached with extreme caution. However, by the
date of the LVT decision there had been cases decided by other LVTs which
should have formed some sort of precedent and Mr Pennycuick drew attention to
five such decisions. First, in the case of a large house at Bournemouth
converted into eight flats, (LRI/94/D), the Southern LVT had included in the
decided price a sum of £645 in respect of the value of insurance commission.
Second, in the case of a house converted into three flats at Brighton
(BTN/LR/5) the South Eastern LVT had included in the price decided an amount in
respect of the value of insurance commission. Third, the London LVT had made a
similar decision in relation to a building containing five flats at Surbiton
(LON/ENF/5). Fourth, Mr Pennycuick referred to the decision of this tribunal in
Castlebeg Investments (Jersey) Ltd v Lynch (1988) 57 P&CR
493, where the price payable for the enfranchisement of a house under the
Leasehold Reform Act 1967 (as amended) (the 1967 Act) was determined at £680,
which included a specific amount of £109.20 in respect of the expectation of
the right to receive insurance commission. Fifth, Mr Pennycuick referred to a decision
of the South Eastern LVT (BTN/LR/3) in respect of a house converted into flats
at Hove, in which the decided price was based on 15 years’ purchase of the
ground rents payable, to include, inter alia, any profit from insurance
commission.
Mr Pennycuick
also referred to another LVT decision made since the LVT decision in the
present case in respect of a block of 50 flats built about 15 years ago in
Bournemouth. In its decision the LVT had included an amount of £1,200 (two
years’ purchase of £596) as compensation for the loss of insurance commission
in the decided price.
Mr Pennycuick
submitted that the first three cases to which he had referred followed the
trend shown by the Castlebeg case and two other decisions of the West
Midlands LVT in cases under the 1967 Act.
In the present
case it was inconceivable that the purchaser of the freehold interest would not
make an arrangement under which he would receive commission from an insurance
company; such commission formed part of the regular income to be derived from
the property.
Mr Pennycuick
drew attention to the definition of the price payable in para 3(1) of the Sixth
Schedule to the 1993 Act, which refers to the amount the freeholders’ interest
might be expected to realise if sold on the open market by a willing seller
(with neither the nominee purchaser nor any participating tenant buying or
seeking to buy) on certain assumptions. He had been purchasing blocks of flats
for many years and assured me that, if the leases allowed for insurance by the
landlord, then the value of the commission relating thereto was taken into
account when forming an opinion as to the price to be paid; in other words the
right to receive such commission had a commercial value.
It was clearly
of great benefit to the lessees of the subject property that the commission
arrangement had been entered into so that the benefit of the substantial
discount could be obtained and passed on to the lessees.
During actions
for non-payment of service charges and insurance costs Mr Pennycuick had been
involved in lengthy and detailed examinations of service charge costs and fees
and it had never been suggested by either learned counsel or the judge that
insurance commission should be disallowed.
Mr Pennycuick
produced a copy of a lease of one of the flats at the subject property and an
audited statement of the total annual cost in respect of the service charge for
the year ended December 31 1994.
His valuation
of the expectation of receiving insurance commission as put to the LVT was:
|
|
|
£ |
|
1994–1995 Plant and |
£223.26 @ 15% |
33.49 |
|
1994–1995 Buildings |
£681.22 @ 10% |
68.12 |
|
|
|
101.61 |
|
Years’ purchase in perpetuity @ 5% |
|
20 |
|
|
|
2,032.20 |
Mr Pennycuick
made no deduction for the cost of collection as this was done as part of the
collection of the service charge.
The 5%
capitalisation rate reflected the great security of the income and the fact
that the income was on a much reduced rate, ie it could have been as much as
30% of the full premium; the building element reflected the 70% discount. Mr
Pennycuick used a commission rate of 10%, rather than the actual 15%, which is
the lowest figure he knew of in the market place and must be available to any
reputable freeholder and/or agency.
In some of the
cases to which he had referred the value of insurance commission had been
reflected by adjusting the figure at which ground rental income had been
capitalised. As a valuer Mr Pennycuick could not agree with this approach;
while the end result might or might not be correct it was proper to look at the
actual insurance figures involved in each case.
During 1995 he
had purchased a block of flats at Henley-in-Arden and paid an enhanced figure
over and above his estimate of the worth of the ground rent income receivable
to reflect the value of insurance commission. The ground rents aggregated
£1,202 pa, the purchase price was £13,400, which represented 11.2 years’
purchase, but that merely showed the result not how he had determined the
value.
The idea of
valuing insurance commission was hardly new, but, in the past, had mainly been
employed in the enfranchisement of single houses. The value in relation to
flats blocks was much more substantive and under the terms of the 1993 Act
should, in Mr Pennycuick’s opinion, be calculated by reference to the
commission to be paid, as it would be in the open market.
Applying the
multiplier used in the Castlebeg case and using the actual commission
passing would produce:
|
|
|
£ |
|
1994–1995 Plant and |
£222.36 @ 15% |
33.49 |
|
1994–1995 Buildings |
£681.22 @ 15% |
102.18 |
|
|
|
135.67 |
|
Years’ purchase |
|
6.5 |
|
|
|
881.86 |
Mr Pennycuick
considered that the collection of insurance premiums as additional rent under
the terms of the flat leases made the income very secure. It must by its nature
keep pace with inflation and to reflect this fact he had used a 5% yield rate
in his original valuation; he had tempered this by using a very modest
commission rate. He submitted
might be paid in the open market, particularly having regard to the long-term
nature of the investment.
In answer to
me Mr Pennycuick said that a purchaser of the freehold interest in the subject
property would not be able to get 15% insurance commission, but, on the other
hand, would not be able to get a 70% discount and these two factors would
offset one another.
There had been
no challenge to the service charge in respect of the subject property.
Mr Pennycuick
sought a determination that the price payable by the nominee purchaser should
be £13,769.92, made up as to the LVT’s valuation before rounding of £11,737.72,
plus £2,032.20 in respect of compensation for loss of insurance commission.
Respondents’
case
Mr Poultney
referred to what the LVT had said in relation to insurance commission. It was
not the case that a landlord could never retain commission; it was dependent
upon the terms of the leases. Clause 3(3) of the leases of the subject property
referred to the lessees’ liability to pay a proportionate part of the expenses
incurred by the lessors in insuring the building; the expense incurred was the
net amount, ie after allowing for the receipt of commission. Para 3 of the
fourth schedule to the leases, which detailed the expenses payable by them by
way of a service charge, referred to the cost of insuring the building; again
this meant the net cost, after allowing for the receipt of commission. Clause
4(c) required the lessors to insure the building with some insurance office or
underwriters of repute, but not with the landlords’ nominated insurers.
In the Castlebeg
case the insurance clause in the lease provided that the lessee had to insure
the house through the ‘Commercial Union Assurance Company or such other office
nominated by the lessor through the lessor or his agent’. In the case of the
subject property there was no express provision for the landlord to require the
tenants to insure with his chosen company; the LVT had differentiated between
the circumstances in this case and the Castlebeg case.
If the
landlord of the subject property had entered into an arrangement to put all
decorative repair work through a particular contractor and secured a 25%
discount on cost in return, if £100 worth of work had been done and the
landlord paid £75, the amount recoverable from the tenants by way of the
service charge would have been £75.
Mr Poultney
submitted that only the net cost of insurance after allowing for the
commission, was recoverable under the terms of the leases of the flats at the
subject property.
Alternatively,
if the insurance cost recoverable should include commission section 19(1) of
the Landlord and Tenant Act 1985 (the 1985 Act) provided that relevant costs
were only recoverable to the extent that they were reasonably incurred; in the
present case, if they were regarded as incurred, they were not reasonably
incurred and the lessees could challenge the landlord’s nominated insurers
under the Schedule to the 1985 Act. The Financial Services Act 1986 placed
obligations upon the recipients of commissions to disclose them; statute law
was tending against the recipients of commission.
Mr Poultney
agreed that the insurance element of the service charges at the subject
property had not been challenged, although there had been disputes about other
elements.
The commission
was received by White Hart, but this was immaterial because Mr Pennycuick was
effectively the owner of the subject property and a partner in the agency. The
relationship could have been re-jigged so that the appellants took the
commission. In these circumstances, the appellants could only recover the net
cost of insurance, ie net of the commission, through the medium of the service
charge.
Mr Poultney
referred to three decisions of the London LVT deciding prices payable for
freehold interests under section 24 of the 1993 Act. The first (LON/ENF/1)
related to a north-west London house converted into two maisonettes; the
landlord’s valuer was recorded as having said that the receipt of insurance
commission might be less certain in the future by reason of a possible change
in the law. In the present case the appellant valued the commission at 20
years’ purchase; that was too much; the long term was uncertain. Even if the
leases enabled the landlord to retain commission and the lessees could not
challenge that as unreasonable, it did not follow that the total price determined
by the LVT would be increased. In the case of the north-west London decision to
which he had referred, the price was determined on the basis of applying a 13%
yield rate to the ground rental income, reflecting any benefit of insurance
commission, which was more favourable to the nominee purchaser than the 9.5%
yield rate, excluding insurance commission, which was the basis of the LVT
decision in the present case.
The second
case was that referred to by the appellants in respect of the building comprising
five flats at Surbiton; the LVT had adopted a yield rate of 12.5% to capitalise
the ground rental income and reflect the value of insurance commission; again
this was more favourable to the nominee purchaser than the yield rate adopted
in the present case.
Last, Mr
Poultney referred to the case of a west London house (LON/ENE/4) converted into
four flats; a LVT decided a price based upon a 13% yield rate; they observed
that auction sale evidence showed that such a yield rate reflected the value of
insurance commission; again the yield rate was more favourable to the nominee
purchaser than in the present case.
Mr Poultney
submitted that the LVT had held against the appellants and the onus of proof
was on them.
Appellants’
response
Mr Pennycuick
said that what was important was the view of a purchaser of the freehold
interest. The receipt of insurance commission was not peculiar to the
appellants; their actual arrangement was immaterial.
The LVT did
not say that the lease provisions did not allow the landlord to take
commission, but said that the arrangement enjoyed by the appellants may not be
enjoyed by a purchaser. Mr Pennycuick did not know of any landlord of a block
of flats who did not have a commission arrangement. Insurance commission would
be in the mind of a purchaser of the freehold interest in the subject property
in the open market. Insurance commission was not a hidden profit; commission
arrangements were well known.
In the cases
of the leases of the subject property, the service charge included the
insurance element, was reserved as rent and thus a secure income; failure to
pay rent could result in restraint or repossession; orders for such remedies
had been granted in Birmingham County Court. Was the charge fair and
reasonable? Where a large discount had been obtained a judge would say it was
reasonable.
In the LVT
decision relating to the north-west London house converted into flats there was
mention of insurance commission income being uncertain. Mr Pennycuick, with his
experience as an insurance broker, did not see how individual lessees would be
able to arrange all the insurance direct, in cases involving plant and
machinery and multi-occupied properties.
In the present
case the insurance premium was recovered as part of the service charge; his
capitalisation of it at 20 years’ purchase reflected the security of the income
and had regard to bank base rates.
LVTs had not
yet agreed on how to approach the valuation of the expectation of the receipt
of insurance commission; some valued it separately; others reflected it in the
yield rate at which they capitalised the ground rental income. A purchaser
would value the latter as such and then value the income from insurance commission
and fix the price accordingly.
Decision
Section 32 and
the Sixth Schedule to the 1993 Act provide that the price payable by the
nominee purchaser for the appellants’ freehold interest in the subject property
shall be the aggregate of three elements; the element relevant to the present
appeal is the amount which, at the valuation date, the freehold interest (with
neither the nominee purchaser nor any participating tenant buying or seeking to
buy) might be expected to realise if sold in the open market by a willing
seller on certain assumptions, which include an assumption that the freehold
interest is subject to any subsisting leases and that there are no statutory
rights to acquire any interest in the subject property nor any new lease
thereof; the other assumptions are not relevant to this appeal.
The issue
raised in this appeal is whether the value of the freehold interest in the
subject property, as defined by statute, would reflect any element of value
attributable to the expectation of the receipt of insurance commission and, if
so, the amount of that element of value.
What has to be
determined is the likely view of potential purchasers and Mr Pennycuick is
right in saying that the appellants’ actual arrangements are immaterial, except
in so far as they provide a practical example of how insurance commission may
be earned.
Mr Pennycuick
valued the expectation of the receipt of insurance commission to a purchaser by
reference to the actual premiums paid, which, in so far as the buildings are
concerned, reflected a 70% discount, unlikely to be available to a purchaser,
and estimating the commission by applying 15% to the premium in respect of
plant and machinery and 10%, rather than the 15%, which the appellants
themselves obtained, in respect of buildings.
Mr Poultney
says that, assuming a purchaser of the freehold obtained insurance commission
by entering into agency arrangements with insurance companies, the amount
chargeable to the lessees under the terms of the leases would be the amount of
the premiums, less the amount of the commission. The fourth schedule to the
leases, which specifies lessors’ expenses which are to be included in the
service charge, refers to ‘the cost of insuring’. The leases contain no
obligation upon the freeholder to enter into an agency arrangement and earn
commission and, if he did not do so, the lessees would not appear to have any
valid complaint against the full amount of the premiums being included in the
service charge.
Further I find
that the freeholder levies the service charge in his capacity as landlord under
the leases, whereas, if he enters into an agency arrangement with an insurance
company and receives commission from them as their agent for performance of
duties under the agency arrangement, albeit that he is able to enter into such
an arrangement because he owns the freehold, he should be regarded as acting in
a capacity other than as landlord and that any commission earned should not be
taken into account in calculating ‘the cost of insuring’.
The ‘cost of
insuring’ included in the service charge in respect of the subject property has
never been challenged, although it made no allowance for insurance commission
earned, neither was there any evidence to suggest that the point had been taken
in any other similar cases.
I therefore
find that the ‘cost of insuring’ under the terms of the lease should be
interpreted as meaning the cost of the premiums, disregarding any insurance
commission earned by the landlord through an agency arrangement with an
insurance company.
In the event
that I so found, Mr Poultney submitted that the cost of insurance within the
service charge, if it did not give credit for any commission earned, could have
been challenged under section 19(1) and the Schedule to the 1985 Act, which
limited costs included in a service charge to those ‘reasonably incurred’.
However, if, as I have found, the commission is received by the freeholder as
insurance company agent rather than as landlord, I do not think that this
statutory provision would enable the lessees to challenge the ‘cost of
insuring’, because it did not give credit for any commission earned by the
landlord as agent.
Mr Pennycuick
is experienced in the valuation of freehold interests in buildings let in flats
on long leases and their management. His evidence is that the purchasers take
into account the potential to obtain insurance commission when considering what
to pay for the freehold interest, as he himself does. His is the only evidence
before me on this and I accept it.
I accept Mr
Poultney’s submission that the circumstances in the Castlebeg case
differ from those in the present case, in as much as, in that case, the tenant
had to insure with an insurance company of the landlord’s choosing.
However the
other LVT decisions cited by the parties all related to cases under section 24
of the 1993 Act. Apart from one case, I could not find any details of the lease
terms relevant to the recovery of insurance costs. In the case relating to a
west London house the terms would seem to have been similar to those in the
present case and I would expect the relevant lease terms in the other cases to
be broadly similar and not materially different from those in the present case.
I therefore
find it significant that, although the way in which the value of the
expectation of the receipt of insurance commission was reflected, the prices
decided in each of the LVT decisions referred to expressly included an element
of value attributable to such an expectation.
On the
evidence I find that the price which would be paid for the freehold interest in
the subject property, in the hypothetical circumstances to be envisaged under
the provisions of the 1993 Act, would include an element to reflect the
expectation of the receipt of insurance commission.
I turn to
consider the quantification of the value of the expectation of the receipt of
insurance commission.
Where there is
evidence of sale prices of comparable properties, these will reflect any
element of value attributable to the expectation of the receipt of insurance
commission and I can understand the rationale of reflecting the value within an
overall valuation, including the receipt of ground rent income, where the
decision is based upon such evidence. However, where there is no such evidence,
I accept Mr Pennycuick’s view that the value of the expectation of insurance
commission should be considered separately from the value of the ground rent
income.
Mr Poultney
compared the yield rates used to capitalise ground rent income, and reflect the
value of the expectation of insurance commission, in the three LVT decisions
referred to, with the 9.5% rate used by the LVT in the present case, excluding
any such value; in each of the three cases the yield rate was higher than 9.5%.
However, there is only one issue in this appeal, which is whether the price
should reflect a value for the expectation of the receipt of insurance
commission; clearly the price decided by the LVT did not do so and, apart from
the lack of any evidence on the point, I find it is not open to me to disturb
the value to be found, excluding the expectation of the receipt of insurance
commission.
Mr
Pennycuick’s valuation commences with actual premiums paid, reflecting the 70%
discount in the case of buildings. He takes the commission at the actual rate
of 15% for plant and machinery and 10% for buildings, as against the actual
rate of 15%, because a purchaser would not expect to achieve such a commission
rate, but would be certain to assume a rate of not less than 10%. In so far as
a purchaser would also be unlikely to achieve a discount as high as 70% Mr
Pennycuick’s valuation seems favourable to the nominee purchaser and I accept
his estimated commission of £101.61.
Mr Pennycuick
regards the commission as well secured income recoverable as rent, which would
rise with any increase in building costs over a long period; he thought this
justified the use of a low yield rate. Mr Poultney submitted that there was
uncertainty as to the commission income and I find that, in several respects,
such income is not as secure as ground rental income. In the Castlebeg
case, which specifically related to the relative yield rates to be applied to
rental income and insurance commission, the tribunal accepted evidence as to
the uncertainties of commission income as including the following reasons:
(a) commission
income was not supported by any covenant; it was supported by a mere contract
under which the insurance company was obliged to pay commission which, no
doubt, could be terminated upon notice being given;
(b) there was no
certainty that the commission rate would always remain the same there was a
possibility that it might be reduced.
As far as
precedents are concerned the years’ purchase applied where the expectation of
the receipt of insurance commission was separately valued in the cases cited,
range from two to 6.5 compared
substantially discounted premium, unlikely to be obtainable by a purchaser, I
do not think the value of the expectation of the receipt of commission would be
likely to exceed 6.5 years’ purchase, reflecting a yield rate of 15.38%.
However, as Mr Pennycuick’s estimate of commission income reflected a
substantially discounted premium, unlikely to be envisaged by a purchaser, I
think a rather higher years’ purchase is justified and adopt 8.5, equivalent to
a yield rate of 11.76% and giving a value of £863.68 (£101.61 x 8.5) to which I
add the LVT’s valuation before rounding thus:
|
£ |
|
|
LVT valuation |
11,737.72 |
|
Value of expectation of the receipt of |
863.68 |
|
12,601.14 |
|
|
Say |
12,600.00 |
The appeal is
therefore allowed to the extent that I determine the price payable by the
respondents to the appellants for the freehold interest in the subject property
at £12,600.
This decision
determines the substantive issues raised between the parties, and the
tribunal’s award is final. The parties are invited to make such submissions as
they are advised as to the costs of the hearing and a letter accompanies this
decision as to the procedure for submissions in writing. The tribunal will, in
due course, incorporate an order as to costs in an addendum to this
decision. Rights of appeal under section 3(4) of the Lands Tribunal Act 1949
and the Rules of the Supreme Court Ord 61 will not accrue until the decision
has been thus completed, ie from the date of the addendum.
Addendum
as to costs
The parties
made submissions as to costs.
The appellants
claimed their costs which they said that they had endeavoured to keep to a
minimum by not employing a solicitor to represent them at the hearing. They had
made a written offer, without prejudice, to settle the matter by the payment of
an additional £500, with each party bearing their own costs, in respect of the
loss of insurance commission on February 15 1996.
The
respondents submitted that each party should pay their own costs; in terms of
the additional price payable, the decision was less than half the amount
claimed. Further the respondents had been penalised by the delay occasioned to
their enfranchisement due to the time taken by proceedings before both the LVT
and this tribunal. This should be taken into consideration in making any award
for costs. As to the appellants’ Calderbank offer, this was made in a
letter dated April 10 1996 and received by the respondents’ solicitors on April
11 1996, which left only two clear working days prior to the date of the
hearing in which to take instructions from a number of individuals comprising
the participating tenants. There was insufficient time in which to explain
comprehensively the consequences of the offer and to take full instructions
prior to the hearing date. The respondents should not therefore be penalised because
of the Calderbank offer.
Each party
commented upon the other submissions; the appellants pointed out that, although
their Calderbank letter was dated April 10 1996 it repeated a without
prejudice offer made on February 15 1996.
Although the
appellants succeeded on the issue of principle involved in the appeal, the
additional price decided was less than half the amount claimed and, but for the
evidence of the appellants’ offer, I should have been minded to award the
appellants only part of their costs. However, it appears to me that the
appellants’ offer, first made by a letter of February 15 1996, was a fair one
and, on the documentary evidence, it seems clear that the respondents had
adequate time to consider it, which their solicitors indicated, in a letter
dated March 18 1996 refusing the offer, they had done.
In these
circumstances I think that the appellants are entitled to their costs of the
appeal. It is therefore ordered that the respondents should pay the appellants’
costs of the hearing, such costs, in default of agreement, to be taxed by the
registrar of the Lands Tribunal on the High Court scale.
