Re Coolrace Ltd and others’ appeals
Leasehold Reform, Housing and Urban Development Act 1993 – Lease renewal – Relativity – Leasehold valuation tribunal adopting relativity percentage derived from graph of Midlands LVT decisions – Whether alternative graph providing better evidence of relativity – Appeal allowed
These were four consolidated appeals concerning applications for lease extensions of five properties in the Midlands under the Leasehold Reform, Housing and Urban Development Act 1993. The appellant was the freeholder in each case. In the course of determining the premium payable for the new leases, the leasehold valuation tribunal (LVT) applied a freehold to leasehold relativity of 86%. In doing so, it preferred the evidence advanced by the lessees, derived from the “Midlands graph of relativity” constructed by West Midlands firm Lawrence & Wightman. That graph used only Midlands LVT decisions, extracted from the composite “LEASE graph” of relativity compiled by the Leasehold Advisory Service from LVT decisions between 1994 and 2007.
The appellants had relied on the Nesbitt & Co graph of relativity, contained in a RICS research paper of October 2009. That graph included Greater London, a proportion of provincial towns covering the south coast and the Midlands region and also included settlement evidence. The LVT rejected that graph on the ground that Midlands information should generally be preferred to graphs drawing more heavily on information from the South East in general, and London in particular.
On appeal from the LVT’s decision, the appellants contended that the best evidence was the LEASE graph since it was totally independent and not reliant on settlement evidence.
Decision: The appeal was allowed.
In the absence of relevant comparable evidence of recent transactions, the only question on relativity was which graph of relativity should be relied on. The LVT had correctly rejected the evidence based on the Nesbitt & Co graph since it was based solely on settlement evidence. However, it had erred in basing its determination on the Lawrence & Wightman Midlands graph, which was based on a small sample extracted from the LEASE graph. The Midlands graph was out of kilter with any of the graphs reproduced in the RICS research paper and there was no evidence that there were particular regional variations in relativity percentages, other than in PCL. The LEASE graph was the most suitable, since it was a broad geographical analysis of a large number of LVT decisions. Accordingly, the appropriate course was to adopt figures based on the LEASE graph.
Although that meant relying on a graph that was based only on past LVT decisions, in the absence of any reliable transactional evidence it was the only available option, and the LEASE graph was more representative of appropriate relativities than the Midlands graph. However, that decision should not be seen as setting a precedent in other cases where evidence more reliable than the LEASE graph was available: Arrowdell Ltd v Coniston Court (North) Hove Ltd [2007] RVR 39 and Nailrile v Earl Cadogan [2009] 2 EGLR 151 considered.
Per curiam: The RICS research paper contained details of a variety of graphs prepared by surveyors and firms that acted for both landlords and tenants, and provided a graphical analysis based on a large number LVT decisions, settlements and valuation opinion. Collectively, these represented the broadest currently available study relevant to the issue of relativity. It might be of assistance to valuers and tribunals, in cases where reliance on such information was the only available option, to produce a composite graph representing, by a single curve, the mid-point of that substantial body of evidence over a wide area.
Anthony Radevsky (instructed by Grove Tompkins Bosworth, of Birmingham) appeared for the appellants; the lessees did not respond to the appeal.
Sally Dobson, barrister
Leasehold Reform, Housing and Urban Development Act 1993 – Lease renewal – Relativity – Leasehold valuation tribunal adopting relativity percentage derived from graph of Midlands LVT decisions – Whether alternative graph providing better evidence of relativity – Appeal allowedThese were four consolidated appeals concerning applications for lease extensions of five properties in the Midlands under the Leasehold Reform, Housing and Urban Development Act 1993. The appellant was the freeholder in each case. In the course of determining the premium payable for the new leases, the leasehold valuation tribunal (LVT) applied a freehold to leasehold relativity of 86%. In doing so, it preferred the evidence advanced by the lessees, derived from the “Midlands graph of relativity” constructed by West Midlands firm Lawrence & Wightman. That graph used only Midlands LVT decisions, extracted from the composite “LEASE graph” of relativity compiled by the Leasehold Advisory Service from LVT decisions between 1994 and 2007.The appellants had relied on the Nesbitt & Co graph of relativity, contained in a RICS research paper of October 2009. That graph included Greater London, a proportion of provincial towns covering the south coast and the Midlands region and also included settlement evidence. The LVT rejected that graph on the ground that Midlands information should generally be preferred to graphs drawing more heavily on information from the South East in general, and London in particular.On appeal from the LVT’s decision, the appellants contended that the best evidence was the LEASE graph since it was totally independent and not reliant on settlement evidence.Decision: The appeal was allowed. In the absence of relevant comparable evidence of recent transactions, the only question on relativity was which graph of relativity should be relied on. The LVT had correctly rejected the evidence based on the Nesbitt & Co graph since it was based solely on settlement evidence. However, it had erred in basing its determination on the Lawrence & Wightman Midlands graph, which was based on a small sample extracted from the LEASE graph. The Midlands graph was out of kilter with any of the graphs reproduced in the RICS research paper and there was no evidence that there were particular regional variations in relativity percentages, other than in PCL. The LEASE graph was the most suitable, since it was a broad geographical analysis of a large number of LVT decisions. Accordingly, the appropriate course was to adopt figures based on the LEASE graph.Although that meant relying on a graph that was based only on past LVT decisions, in the absence of any reliable transactional evidence it was the only available option, and the LEASE graph was more representative of appropriate relativities than the Midlands graph. However, that decision should not be seen as setting a precedent in other cases where evidence more reliable than the LEASE graph was available: Arrowdell Ltd v Coniston Court (North) Hove Ltd [2007] RVR 39 and Nailrile v Earl Cadogan [2009] 2 EGLR 151 considered.Per curiam: The RICS research paper contained details of a variety of graphs prepared by surveyors and firms that acted for both landlords and tenants, and provided a graphical analysis based on a large number LVT decisions, settlements and valuation opinion. Collectively, these represented the broadest currently available study relevant to the issue of relativity. It might be of assistance to valuers and tribunals, in cases where reliance on such information was the only available option, to produce a composite graph representing, by a single curve, the mid-point of that substantial body of evidence over a wide area.Anthony Radevsky (instructed by Grove Tompkins Bosworth, of Birmingham) appeared for the appellants; the lessees did not respond to the appeal.
Sally Dobson, barrister
