Leasehold enfranchisement – Leasehold Reform Act 1967 – Determination of price – Appellant long leaseholder seeking to acquire freehold of house – Works carried out since grant of lease to convert that property from two residential units to a single house – Whether price payable for freehold to be determined under section 9(1) or 9(1A) of 1967 Act – Whether conversion affecting “appropriate day” on which rateable value to be determined for that purpose – Appeal dismissed
The first-tier tribunal (FTT) was asked to determine the price payable by the appellant to acquire the freehold of a house in Liverpool under the leasehold enfranchisement provisions of the Leasehold Reform Act 1967. The appellant held the property on a long lease granted in 1985 for a term of 99 years. At the date of grant, the property had comprised two separate residential units, namely a ground-floor flat and a two-floor maisonette. However, by October 1985 the property had been converted into a single house and a swimming pool had been installed.
The FTT tried a preliminary issue as to whether the price payable should be calculated under section 9(1) or 9(1A) of the 1967 Act or under section 9(1A). The FTT noted that, where a house and premises had a rateable value above £200 on the “appropriate day”, then the right to enfranchise depended on section 1A and the price fell to be ascertained under section 9(1A). It therefore asked itself: (i) whether the house and premises had a rateable value at the commencement of the tenancy or else at any time before 1 April 1990, as required by section 1(1)(a)(i) of the 1967 Act; and (ii) if so, what was the “appropriate day”, the rateable value on which determined whether the valuation basis was section 9(1) or section 9(1A).
The FTT considered that the first issue was determined by section 25(1) of the Rent Act 1977, such that, where the property had consisted of two hereditaments as at 23 March 1965, the correct approach was to aggregate the rateable values of the two, producing a rateable value of £236. In relation to the second issue, the FTT considered that, on the application of section 1(4) of the 1967 Act and section 25(3) of the 1977 Act, the “appropriate day” was 23 March 1965. It concluded that, as the rateable value was more than £200 at that date, section 1A of the 1967 Act applied so that the valuation was under section 9(1A).
The appellant appealed. He contended that the “appropriate day” was not 23 March 1965 but was the date when a single rateable value of £310 was first entered for the entire property; since that was after 1 April 1973, section 1 (1) of the 1967 Act applied and the valuation was therefore under section 9(1). Relying on the reasoning in Griffiths v Birmingham City District Council [1987] CLYB 2172, he argued that there had been a substantial change in the identity of the property, after the grant of the lease, when it was converted from two separate dwellings into a single house. He relied on section 25(3)(b) of the 1977 Act, which operated to defer the “appropriate day” to the date when a new rateable value was first shown in the valuation list in a case where changes were made to a property which were more radical than mere improvements and constituted a change in the identity of the property which necessitated its revaluation for rating purposes.
Held: The appeal was dismissed.
(1) The recorded rateable value of the property had been £310 since January 1985, which was contemporaneous with the lease, and, more importantly, prior to the physical alterations that had resulted in the conversion of the two former residential units into a single house. Accordingly, the appellant could not show that the valuation list had been altered with reference to the new property comprising the rateable hereditament in its allegedly new and discrete form consequential on the physical alterations. The work that was undertaken post-dated January 1985 and thus any re-rating exercise. In order to displace the date of an earlier entry in the valuation list as the “appropriate day”, it was necessary to establish both: (i) a substantial change in the identity of the hereditament and (ii) that that new entity had been re-rated and included in the valuation list. Since the £310 entry pre-dated the conversion of the property into a single house, that entry could not relate to the new house so formed, with the result that there could have been no substantial change in the identity of the hereditament in the valuation list, and thus nothing to displace 23 March 1965 as the “appropriate day”, at which time the property consisted of two hereditaments with an aggregate value in excess of £200. The decision of the FTT contained no error of law.
(2) Obiter: It was unnecessary definitively to decide whether a substantial change between premises in an earlier state and in a subsequent state was sufficient to constitute a change in the identity of the rateable hereditament sufficient to displace an earlier “appropriate day”. When it was necessary for that issue to be decided, it would be important to bear in mind the statutory equation of the expression “the house and premises or any other property” in the 1967 Act with the word “dwellinghouse” in sections 25 of the 1977 Act: see sections 1(4) and 37(6) of the 1967 Act; and also the applicable statutory directions in section 25 of the 1977 Act. Parliament had clearly considered that a house and premises might comprise, or might have comprised, more than one rateable hereditament, or might form, or might have formed, part only of a rateable hereditament; and also that an alteration in rateable value which did not operate retrospectively as at the appropriate date should have no effect: Dixon v Allgood considered. That appeared to indicate that some change more radical than the mere fact of improvement or structural alteration had to have taken place before it could arguably be said that a house and premises had shed their identity and become a new rateable hereditament so as to displace what would otherwise be the appropriate day. Structural alterations of an insubstantial or non-structural, and still less of a trifling, character would not be sufficient merely because there had been a functional change in the use of the house and premises.
In the instant case, had the appellant succeeded in showing that the rateable value had been entered as £310 following, and consequential on, the conversion of the property into a single house, the tribunal would still have concluded that the alterations that took place between January and October 1985 to convert the two existing residential units into a single dwelling were insufficient to constitute a change in the identity of the rateable hereditament so as bring the appropriate day forward in time to 1985 and to make the rateable value of the property on the appropriate day £310. The works amounted to no more than works of repair and improvement, and the conversion of two residential units into one. That was insufficient to bring any principle of “substantial change of identity” into play, even if such a principle existed.
Andrew Orme of Orme Associates, Property Advisers, appeared for the appellant; Nicholas Jackson (instructed by Hill Dickinson LLP, of Liverpool) appeared for the respondent.
Sally Dobson, barrister
Click here to read transcript: Clifton v Liverpool City Council
