The Crown Estate Commissioners have fended off an appeal by a lessee of two blocks on the Victoria Embankment, SW1, over how to split the premium to be paid by a tenant for a new lease of her flat.
The Court of Appeal has upheld a decision of the Upper Tribunal (Lands Chamber) in the case, which raised a question over the valuation provisions in the Leasehold Reform, Housing and Urban Development Act 1993.
The issue involved how to apply the so-called “no Act” assumption involved in calculating the premium to be paid for a new lease under the 1993 Act: the assumption which ensures that the open market valuation is not reduced by the compulsory acquisition rights that the statute grants.
The key question was whether, for the purposes of the complex calculation, that assumption applied only to the tenant’s flat at issue (as claimed by Whitehall) or whether it applied to the whole building, as contended by the Commissioners, meaning that the tenants of other comparable flats should also be treated as having no Act rights.
Kerry Glanville, senior partner at Pemberton Greenish, who was instructed by the Crown Estate Commissioners, welcomed the clarity brought by today’s decision.
She said: “The Court of Appeal has today handed down its decision regarding Whitehall Court, confirming the position for the premium payable to extend a lease in relation to the so-called ‘no-Act’ assumption, which ensures that the open market valuation of a lease is not reduced by the compulsory acquisition rights the tenant is allowed by law.
“Specifically, the Court of Appeal was asked whether the assumption extends to the building containing the tenant’s flat or if it applies only to the tenant’s flat. By finding that the assumption extends to the entire building – not just the tenant’s flat – the Court of Appeal judgment ensures that the rights of other qualifying tenants do no depress the value of the landlord’s interest.
“It is, perhaps, surprising that although the ambit of the ‘no Act’ assumption has been raised in other cases, this precise point has not actually had to be addressed by the court until now. The clarity provided by this decision is welcome.”
The case centred on Whitehall Court, a large Victorian mansion block which fronts the Victoria Embankment in London. Its freehold is owned by the Crown and managed by the Crown Estate Commissioners. Whitehall Court London Ltd is the lessee of blocks 3 and 4 of Whitehall Court, which contain a large number of high-value flats, some offices and a club, all of which are held on long underleases reserving a ground rent.
The tenant of Flat 71A sought a new and extended lease and while she agreed her terms of acquisition, including the total premium to be paid, Whitehall and the Commissioners were unable to agree the valuation of their respective interests and how to divide the premium between them.
The issues decided by the UT, and now the Court of Appeal, should enable the parties to calculate how the premium should be divided.
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