Leasehold enfranchisement – Leasehold Reform, Housing and Urban Development Act 1993 – Lease extension – Valuation costs – Appellant freeholder claiming valuation costs in respect of respondent’s abandoned lease extension claim by reference to fixed fee charged by surveyor – Leasehold valuation tribuinal awarding lesser sum based on hourly rate – Section 60(1)(b) of 1993 Act – Whether surveyor’s fixed fee reasonably incurred in producing valuation – Appeal dismissed
The respondent tenant served a notice, under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993, claiming a lease extension of its flat, which was located in a building of which the appellant was the freeholder. The appellant retained a surveyor to act for him in relation to the lease extension. The surveyor’s fee structure, to which the appellant agreed, included a fixed fee of £3,000-5,000 per flat, depending on scale and complexity, for the first, pre-counternotice stage of the process, including valuation, a further £3,000-5,000 per flat for the second stage, which involved negotiations with the tenant, and an hourly rate thereafter for the third stage, namely a reference to the leasehold valuation tribunal (LVT).
The surveyor found the first stage of the process to be simpler than expected. On its advice, the appellant served a counternotice, proposing a premium of £150,000 for the lease extension. Subsequent negotiations between the parties proved unsuccessful; the surveyor found that stage more difficult than expected. The appellant applied to the LVT to determine the terms of the lease extension but, shortly thereafter, the respondent withdrew its claim. In the meantime, the appellant had paid two invoices billed by the surveyor, both for £4,000 plus VAT, for first- and second-stage work respectively.
The appellant sought to recover from the respondent the valuation and legal fees that it had incurred in connection with the claim, pursuant to section 60(1) of the 1993 Act. In respect of valuation costs, he claimed the £4,000 plus VAT that he had paid to his surveyor for the first-stage work. Rejecting that claim, the LVT awarded £1,725 and £1,388, plus VAT, for valuation and legal fees respectively. It found that the £4,000 claimed for the valuation work was not reasonably incurred and instead calculated the amount by reference to an hourly rate, based on the rate quoted for the third-stage work.
The appellant appealed in respect of valuation costs. His surveyor submitted, on his behalf, that clients preferred fixed fees to time-related fees and that the fixed fee that the appellant had agreed to pay represented the reasonable costs of producing a valuation of the property for the purpose of fixing the premium.
Held: The appeal was dismissed.
The surveyor’s contention that clients preferred fixed fees to time-related fees was accepted. However, it had not shown that the fee that the appellant had paid for the valuation was reasonable within the meaning of section 60(1)(b). The appellant had accepted the surveyor’s fee basis in anticipation of the surveyor advising throughout the first and second stages. Accordingly, rather than agreeing to pay a fee of £4,000 plus VAT for the valuation, the appellant had in effect agreed a range of charges between £6,000 and £10,000 for the first and second stages combined. It was understandable that the surveyor would want to apportion its charges between the work carried out at the first and second stages, so as to enable it to submit an account after service of the counternotice, rather than waiting to be paid until negotiations had been concluded. However, the surveyor’s attribution of the same range of fees to both stages was arbitrary. Assuming that the case had proved to be simpler than anticipated at the first stage and more complex in subsequent stages, and that the combined fee of £8,000 plus VAT that was paid for the first and second stages was reasonable, the amount reasonably attributable to the first stage would be considerably less than £4,000. Moreover, since the £3,000-5,000 range of fees for the first stage depended on scale and complexity, a fee of £4,000 was excessive where that stage had proved simpler than expected. Furthermore, the work invoiced for that stage included the discussion of issues, such as tactics concerning a proposal by the lessee to expand its demise and make other alterations, that did not fall within the ambit of section 60(1)(b). The appellant had therefore failed to prove that a fee higher than that determined by the LVT was reasonable: Blendcrown Ltd v Church Commissioners for England [2004] 1 EGLR 143 applied.
The work that the surveyor had carried out at the second stage, after service of the counternotice, could not be described as valuation for the purposes of section 60(1)(b). Although it was to be expected that one or both valuers would refine their valuations on one or more occasions before negotiations were completed, section 60(1)(b) did not apply to valuations prepared in the course of negotiations; nor did it apply to work of a valuation nature that was undertaken, after the first-stage valuation had been provided to the client and the counternotice served, so that the valuer was prepared by the time negotiations commenced.
Mr Peter Beckett FRICS appeared for the appellant with permission of the tribunal; the respondent did not appear and was not represented.
Sally Dobson, barrister
