Two-storey, late-Victorian property, partly used as shop and for storage, in Saltley, Birmingham — Whether relevant RV was as at ‘the appropriate day’ (March 23 1965 in this case), when it was below £200, as contended for tenant, or as at ‘the relevant time’ (December 21 1984), when it was above £500, as contended for landlords — In other words, whether valuation was to be in accordance with subs (1) or subs (1A) of s9 of the 1967 Act as amended — No previous reported case on this issue — Tenant’s submission that subs (1A) dealt solely with RVs and did not affect valuation matters — Landlords argued that use of present tense in phrase ‘the rateable value of which is above . . . £500′ implies that date of the relevant RV is date of leaseholder’s notice — Agreement that freehold price would be £5,750 if tenant’s contention accepted or £21,000 if landlords’ contention accepted — Tribunal ‘find it difficult to fault’ landlords’ interpretation of subs (1A) — No doubt that subs (1A) materially affected basis of valuation by omitting words in subs (1) relating to exclusion of tenant’s bid — No reference in subs (1A) to the appropriate day or any other date, ‘although it would have been a simple matter to include such a reference’ — Landlords’ valuation produced by subs (1A) correct
The applicant
tenant was Surinder Kumar Chada and the respondent landlords were G P Sanctuary
and J C Emmerson, trustees of the Norton Estate.
In their
decision, THE TRIBUNAL said: This was a reference to determine the price to be
paid for the freehold interest in 125 Alum Rock Road, Saltley, Birmingham 8, in
accordance with the provisions of the Leasehold Reform Act 1967, as amended.
The tenant was
represented by Ms Roberta A McDonald, of Tyndallwoods, of Birmingham,
solicitors, who called Mr E J Rutledge, chartered surveyor, of Lawrence &
Wightman of Birmingham. The landlords were represented by Mr D G Readings, of
counsel [instructed by Warmington & Hasties], who called Mr Ian McPhillips BSc,
chartered surveyor, of Frederick J Pepper & Sons of Birmingham.
The tribunal
inspected the property prior to the hearing. No 125 Alum Rock Road is a
two-storey property built of brick and slate about 1887. Its current use is
that of a fish-and-chip shop with storage and living accommodation to the rear
and above. The accommodation comprises: on the ground floor — shop, two rooms
(partly used for storage purposes), kitchen, bathroom with wc and lean-to
store; on the first floor — three bedrooms. The premises are flush with the
pavement at the front and include a small rear garden with separate rear
access.
The premises
are subject to an underlease, dated July 27 1923, for a term of 99 years (less
four days) from March 25 1887 at an apportioned annual ground rent of £3.25.
The notice of claim was served on December 21 1984 and was admitted to be
valid. The rateable value on March 23 1965 was £198 and at the relevant time,
as defined by the Act, £597.
The tribunal
was informed at the outset that all of the above material facts were agreed.
Furthermore, it was indicated that the parties were also agreed that, in the
event of the tribunal’s accepting the tenant’s contention, the price to be paid
for the freehold would be £5,750, while in the event of the tribunal’s
accepting the landlords’ contention, that price would be £21,000.
The issue in
dispute between the parties was expressed on behalf of the landlords as being:
‘Should the freehold interest be valued (a) in accordance with section 9(1A) of
the Leasehold Reform Act 1967 . . . , or (b) in accordance with section 9(1) of
the Leasehold Reform Act . . . .’
The tenant’s
solicitors had expressed it as: ‘The crux of the dispute between the tenant and
the freeholder is the interpretation of the word ‘is’. It will be argued on
behalf of the tenant that it refers to ‘the appropriate day’ within the meaning
of the Act. It will be argued on behalf of the freeholder that it refers to
‘the relevant time’ within the meaning of the Act.’
For the
tenant, Ms McDonald contended that the subject property qualified under the
original provisions of the Act, since its rateable value on the appropriate day
was below £200, and that it was not necessary to look at the later amendments
introduced by the Housing Act 1974. She considered section 9(1A) dealt solely
with the matter of rateable values and was not intended to affect matters of
valuation. She did not think it was the intention of the 1974 Act to reduce the
tenant’s rights. Alternatively, if the method of valuation had been revised,
this could only relate to those properties which qualified as a result of the
extension of the rateable value limits. Ms McDonald referred to articles taken
from Estates Gazette ((1975) 234 EG 729 and (1978) 245 EG 768). She did not
agree with the view expressed in Woodfall at p 3621 of the 28th edition.
Mr Rutledge submitted his evidence in writing to the tribunal, supporting Ms
McDonald’s submissions.
For the
landlords, Mr Readings’ submissions may be summarised from the written evidence
of Mr McPhillips in the following extracts. Section 9(1A) provides that the
price payable is determined at ‘the relevant time’ (defined as the date of the
leaseholder’s notice) and while no date is given for the time at which the
rateable value is to be ascertained, the use of the present tense of the word
‘is’ implies the date of the leaseholder’s notice. If it had been intended that
section 9(1A) should relate the rateable value to ‘the appropriate day’ it
would have been necessary to specify a number of different rateable values for
the different possible appropriate days. The provisions for the calculation of
the enfranchisement price as set out in section 9 should not be confused with
the rateable value limits concerning the entitlement to enfranchise contained
in section 1 of the Act, as amended. The rateable value limits in section 1
relate only to the entitlement to enfranchise and have no effect upon the
method of valuation. Mr Readings pointed out that subsection (1A) appeared as
part of section 9, which deals specifically with the purchase price and costs
of enfranchisement. If it had been intended that ‘the appropriate day’ should
be assumed in section 9(1A) then it would have been entirely simple for this to
have been stated.
The tribunal
began its consideration of this matter by looking at those subsections of the
Act, as amended, to which it had been referred. These are as follows:
Section
1(1)(a) (dealing with tenants’ entitlement to enfranchise)
his tenancy
is a long tenancy at a low rent and subject to subsections (5) and (6) below
the rateable value of the house and premises on the appropriate day is not (or
was not) more than £200 or, if it is in Greater London, than £400; . . .
Section
1(5)(a)
in a case
where the tenancy was created on or before 18th February 1966, as if for the
sums of £200 and £400 specified in that subsection there were substituted
respectively the sums of £750 and £1,500; . . .
Section 1(4)
(definition of ‘the appropriate day’)
In subsection
(1)(a) above, ‘the appropriate day’, in relation to any house and premises,
means the 23rd March 1965 or such later day as by virtue of section 25(3) of
the Rent Act 1977 would be the appropriate day for purposes of that Act in
relation to a dwelling-house consisting of that house;
Section 37(1)(d)
(definition of ‘relevant time’)
‘relevant
time’ means, in relation to a person’s claim to acquire the freehold or an
extended lease under this Part of this Act, the time when he gives notice in
accordance with this Act of his desire to have it;
Section 9(1)
(dealing with the purchase price etc)
Subject to
subsection (2) below, the price payable for a house and premises on a
conveyance under section 8 above shall be the amount which at the relevant time
the house and premises, if sold in the open market by a willing seller (with
the tenant and members of the family who reside in the house not buying or
seeking to buy), might be expected to realise on the following assumptions; . .
.
Section 9(1A)
Notwithstanding,
the foregoing subsection, the price payable for a house and premises, the
rateable value of which is above £1,000 in Greater London and £500 elsewhere,
on a conveyance under section 8 above, shall be the amount which at the
relevant time the house and premises, if sold in the open market by a willing
seller, might be expected to realise on the following assumptions: . . .
There is then
the relevant extract from Woodfall on Landlord and Tenant at p 3621
(28th ed), which is as follows:
Section 9 of
the Act of 1967, which lays down assumptions upon which the price is to be
calculated, was amended by section 118(4) of the Housing Act 1974 by the
addition of two new subsections (1A) and (1B). Subsection (1A) lays down
different assumptions from that in subsection (1) for use where the rateable
value of the house and premises is above £1,000 in Greater London and £500
elsewhere. These values are not defined by reference to the appropriate day
(April 1 1973), or any particular day (see sect 1(d) ante). Accordingly,
it would seem that if a house and premises let under a tenancy created before
February 18 1966, had a rateable value on April 1 1973, in London, of, for
example, £900 and, if by the date of the tenant’s notice claiming
enfranchisement the rateable value has become £1,000 on a rating revaluation,
subsection (1A) will then apply.
Both Ms
McDonald and Mr Readings agreed that there had been no case dealing with the
specific point at issue. Ms McDonald had referred us to several cases where she
claimed there was an inference that these supported her contention, but this
was disputed by Mr Readings. We have to say we do not find much help from these
cases or from the articles in Estates Gazette to which Ms McDonald also
referred.
It might also
be said, as Ms McDonald pointed out, that if the 1967 Act had not been amended
there is no doubt the tenant here would have qualified under the original
provisions and section 9(1) would have applied. There is no question, however,
that we must deal with the Act as amended and that section 9(1A) is applicable.
The issue, therefore, turns on the interpretation which is to be placed on that
subsection.
We have to say
that we find it difficult to fault Mr Readings’ interpretation of section
9(1A). There is no doubt that that section materially affected the basis of valuation
by reason of the omission of the words found in section 9(1), ‘(with the tenant
and members of the family . . . not buying or seeking to buy)’. Equally there
is no reference in section 9(1A) to the appropriate day or any other date,
although it would have been a simple matter to include such a reference if this
had been intended. Finally, there is the use of the present tense in the word
‘is’. We conclude that section 9(1A) must be read as it is written without any
assumptions (in which we are supported by Woodfall) and that this leads
to the conclusion that the valuation produced by section 9(1A) (the submission
by the landlords) is correct.
Accordingly,
we determine the price to be paid for the freehold interest in 125 Alum Rock
Road, Saltley, Birmingham, is £21,000.
