Leasehold enfranchisement – Collective enfranchisement – Block of flats – Respondent nominee purchaser seeking to acquire freehold on behalf of qualifying tenants — Appellant landlord disputing right to acquire additional land – LVT determining matters in dispute – Whether price payable for additional land agreed such that LVT lacking jurisdiction to determine it – Whether grounds for departing from Sportelli deferment rate of 5% – Whether appeal to Lands Tribunal by way of review or rehearing – Appeal allowed in part
The respondent served notice, as the nominee purchaser for the qualifying tenants, under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993, to purchase the freehold of a block of flats, , from the appellant freeholder and landlord. In the notice, the respondent proposed that the property to be acquired should also include certain additional land for which it proposed a purchase price of £14,000. By its counternotice, the appellant indicated that the proposals concerning the acquisition of the additional land, including the purchase price, were not acceptable. It made a counter-proposal, which stated that if, contrary to its view, the respondent was entitled to acquire that land, its proposed purchase price was £14,000.
The respondent applied to the leasehold valuation tribunal (LVT) for a determination of the terms of the acquisition that remained in dispute between the parties, which it described as “the Property, the price, costs and transfer”. The LVT determined that the additional land should be included in the property to be acquired since the rights that the appellant was offering over it were insufficient to confer upon the respondent the rights to which it was entitled under section 1(4). It found that that land had no value in the market place and made a nominal valuation of £1. Regarding the price to be paid for the block, an issue arose as to the deferment rate to be applied in determining that price. After hearing expert evidence, the LVT applied a deferment rate of 7.5% and found that the purchase price was £285,246.
The appellant appealed to the Lands Tribunal. It contended that: (i) the LVT had lacked jurisdiction to make its own valuation of the additional land since the purchase price had been agreed by the parties at £14,000; and (ii) in the light of the Lands Tribunal decision in Earl Cadogan v Sportelli LRA/50/2005 [2007] 1 EGLR 153, the LVT should have applied a deferment rate of 5%.
The respondent also made a submission that the Lands Tribunal appeal should be treated as an appeal by way of review only since the appellant had not stated in its application for permission to appeal that a rehearing was sought, such that no valuation evidence could be called and the tribunal could not interfere with the deferment rate decided upon by the LVT.
Decision: The appeal was allowed in part.
(1) An appeal from an LVT to the Lands Tribunal is a statutory right of appeal under section 175 of the Commonhold and Leasehold Reform Act 2002, subject only to obtaining permission to do so. Although permission could be granted, the tribunal was entitled to impose conditions that reduced the ambit of the appeal. In the absence of such conditions, the appeal was not restricted to a review but was an unrestricted section 175 appeal by way of rehearing, in which the appellant was entitled to call evidence. The appellant’s application for permission had expressly stated that it intended to call expert evidence, and the president, when granting permission, had clearly contemplated that the Sportelli point would be available to the appellant on the appeal. Consequently, the appeal was not restricted to a review.
(2) The LVT, having decided that the additional land was to be included in the purchase, had jurisdiction to determine the price to be paid for it. The terms of the application to the LVT were wide, such that it had jurisdiction to decide the point unless it could be said that the issue was not a term of acquisition that, within section 24(1) of the 2002 Act, remained “in dispute at the end of the period of two months beginning with the date on which the counter-notice was so given”. The appellant had expressly stated in its counternotice that it did not accept the respondent’s proposal regarding the purchase price for the additional land. That express wording could not be ignored merely by reason of the appellant’s apparent contingent agreement, in a subsequent paragraph, to a £14,000 purchase price should the LVT decide that the additional land was to be acquired. Accordingly, there was on the face of the notice and counternotice a dispute regarding the additional land, and the respondent was entitled to treat that as a dispute regarding all aspects of that land, including the purchase price.
(3) It was not for the Lands Tribunal to overturn the conclusion of the LVT on a given point unless it was convinced that the LVT’s conclusion was clearly wrong. It did not automatically follow from the decision in Sportelli that a deferment rate higher than 5% must be wrong: Ulterra Ltd v Glenbarr (RTE) Co Ltd [2008] 04 EG 174 applied. The task of the Lands Tribunal was to examine the valuation evidence in the light of Sportelli in order to decide whether the LVT’s decision was wrong. It was not incumbent upon the appellant to prove the absence of any considerations that justified a departure from the 5% deferment rate, failing which that rate would have to be fixed at the figure determined by the LVT. If circumstances could justify a departure from that rate, the tribunal had to consider the appropriate rate to be applied. However, in the instant case, the appropriate deferment rate was the generic 5% rate for flats laid down in Sportelli. Although the property was neither a prime property nor located in central London, the evidence did not establish that its long-term growth rate was likely to materially differ or that it was especially prone to the risk of deterioration and obsolescence such as to require an adjustment of the risk premium. Factors such as the age, physical condition, design and construction had already been accounted for in the purchase price.
Gary Cowen (instructed by Wallace LLP) appeared for the appellant; Nathaniel Duckworth (instructed by Jaffe Porter Crossick) appeared for the respondent.
Sally Dobson, barrister
