Re Mansal Securities Ltd and others’ application

Leasehold enfranchisement — Leasehold Reform Act 1967 —Determination of price — Deferment rate — Valuation of houses in West Midlands — Leasehold valuation tribunal applying deferment rate of 5.5% — Whether guidance in Earl Cadogan v Sportelli applicable to enfranchisements under section 9(1) of 1967 Act — Whether higher risk premium appropriate Whether departure from Sportelli rate justified on ground of location The appellants in the conjoined appeals were the freeholders of houses in the West Midlands that were the subject of leasehold enfranchisement claims by leaseholders under section 9(1) of the Leasehold Reform Act 1967. In valuing the freehold interest, the leasehold valuation tribunal (LVT) applied a deferment rate of 5.5%, thereby differing from the rate of 4.75% for houses laid down in Earl Cadogan v Sportelli [2007] 1 EGLR 153 (LT); [2007] EWCA Civ 1042; [2008] 1 EGLR 137 in respect of the prime central London area (PCL). In the decisions under appeal, the LVT took the view that: (i) the risk premium element of the deferment rate should be higher on a valuation under section 9(1) than on a valuation under section 9(1A), with which Sportelli had been concerned, owing to the relative advantage of potential vacant possession on the expiry of the lease in a section 9(1A) case; (ii) Sportelli was not the appropriate starting point in a section 9(1) case since the capitalisation rate was being deferred, not a capital sum; and (iii) the real growth rate element might be lower in the West Midlands than in the PCL. The appellants appealed. Decision: The appeals were allowed. (1) The price payable on a valuation under section 9(1) of the 1967 Act is reached by ascertaining the modern ground rent under section 15 and then capitalising that rent, deferred for the unexpired term of the existing lease. Although the modern ground rent will be payable for 50 years and will be subject to review after 25 years, the generally recognised method is to capitalise the section 15 rent as though in perpetuity, deferred for the period of the unexpired term of the existing tenancy. Although in theory, therefore, the valuer is capitalising a ground rent payable on reversion, he is in practice deferring a capital sum, namely the site value, receivable upon the termination of the existing lease. Consequently, the guidance on the deferment rate in Sportelli should be followed in cases under section 9(1) as well as those under section 9(1A). (2) On a section 9(1) valuation, the risk premium should be increased to 4.75%, giving an overall deferment rate of 5%. The departure from the 4.75% generic rate in Sportelli reflects the fact that the reversion in a section 9(1) case is to a ground rent only and a potential purchaser is likely to require a higher risk premium to compensate for the increased volatility and illiquidity of that reversion over a reversion that includes a house standing on the site, although that increased risk will, to some extent, be offset by the reduced risk of deterioration and obsolescence. (3) There was insufficient evidence before the tribunal to displace the Sportelli rate on the ground of location. The LVT’s views on house price growth in the West Midlands were based upon inadequate information and would require a fuller investigation in similar future cases. The following cases are referred to in this report. Baronet Nicholson (Re) LRA/29/2006 unreported 8 January 2007, LT Cik v Chavda LRA/111/2007 unreported 7 August 2008, LT Daejan Investments Ltd v The Holt (Freehold) Ltd LRA/133/2006, unreported 2 May 2008, LT Earl Cadogan v Sportelli; Earl Cadogan v 27/29 Sloane Gardens Ltd; Earl Cadogan v Grandeden Property Management Ltd; Howard de Walden Estates Ltd v Maybury Court Freehold Co Ltd; Bircham & Co Nominees (No 2) Ltd v Clarke LRA/50/2005 [2007] EWCA Civ 1042; [2008] 1 WLR 2142; [2008] 2 All ER 220; [2008] 1 EGLR 137; [2007] RVR 314, [2007] 1 EGLR 153; [2006] RVR 382, LT Farr v Millersons Investments Ltd (1971) 22 P&CR 1055; 218 EG 1177; [1971] JPL 523, LT Hildron Finance Ltd v Greenhill Hampstead Ltd [2008] 1 EGLR 179, LT These were conjoined appeals by the appellants: Mansal Securities Ltd; JGS Properties Ltd; Sidewalk Properties Ltd; Trustees of the Calthorpe Edgbaston Estate; Business Flats Ltd; Denetower Ltd; Soundmanor Ltd; Linecroft Ltd; and DG Lewis Estates Ltd, as freeholders, from decisions of the Leasehold Valuation Tribunal of the Midland Rent Assessment Panel determining the price payable by leaseholders on leasehold enfranchisements under section 9(1) of the Leasehold Reform Act 1967. Anthony Radevsky (instructed by Cottons, chartered surveyors, of Edgbaston, by direct professional access for the first, second, fifth, seventh and ninth appellants; by Boodle Hatfield for the fourth appellant; and by Nick Plotnek Associates, of Harbourne, by direct professional access for the third, sixth and eighth appellants) appeared for the appellants; the leaseholders did not respond to the appeals. Giving his decision, Mr Norman Rose FRICS said: Introduction [1] These are 22 appeals, made by the freeholders and heard together, against decisions by the Leasehold Valuation Tribunal of the Midland Rent Assessment Panel (LVT) involving valuations under section 9(1) of the Leasehold Reform Act 1967 (the 1967 Act). In each case, the LVT applied a deferment rate of 5.5% in valuing the freehold interest. The appellants consider that the LVT should have used a rate of 4.75%, the figure determined for houses by this tribunal in Earl Cadogan v Sportelli [2007] 1 EGLR 153 and approved by the Court of Appeal [2007] EWCA Civ 1042; [2008] 1 WLR 2142* to the extent that it related to houses in the prime central London (PCL) area. The LVT gave permission to appeal to this tribunal in each case. None of the leaseholders responded to the appeals. [2] In one case, relating to 25 Inchford Road, Solihull, there is also an appeal against the LVT’s use of a rate of 6% when capitalising the ground rent during the term of the existing lease. The appellant contends that the correct capitalisation rate should be 5.25%. |page:88| [3] Details of the appellants, their properties, the leaseholders, the prices determined by the LVT and those suggested by the appellants’ expert witness are set out in the attached schedule: see appendix 1. [4] Mr Anthony Radevsky of counsel appeared for the appellants. He called one expert witness, Mr Kenneth F Davis FRICS, who holds among other positions that of a consultant to Cottons, chartered surveyor of Birmingham. [5] The 22 houses with which this decision is concerned are all situated in the West Midlands conurbation. They vary in size, type and class, offering a broad spectrum of family accommodation. The respective freehold vacant possession values determined by the LVT, against which there is no appeal, and the unexpired lease terms are as follows: Address Value Unexpired term 512 Haslucks Green Road £240,000 57 years 25 Inchford Road £325,000 68 years 89 Rowood Drive £180,000 57 years 38 Rowood Drive £180,000 56 years 19 Ingham Way £230,000 56 years 93 Reindeer Road £175,000 57 years 78 Old Oscott Hill £130,000 24 years 5 Greenslade Road £231,000 58 years 5 Elmwood Rise £225,000 55 years 17 Belmont Close £145,000 67 years 213 Nuthurst Road £127,500 44 years 70 Greenacres Road £145,000 27 years 98 Reindeer Road £175,000 57 years 7 Barford Close £152,500 61 years 61 Maisemore Close £177,500 69 years 8 Northfield Close £150,000 73 years 15 Latchford Close £240,000 72 years 89 Donnington Close £132,000 65 years 30 Beech Avenue £180,000 25 years 7 Farriers Mill £140,000 89 years 64 Pooley View £195,000 57 years 77 Pooley View £175,000 57 years Case for appellants [6] Mr Davis said that, in deciding which deferment rate was appropriate, the starting point must be the guidance given by the Lands Tribunal (LT) in Sportelli. The fact that Sportelli concerned a valuation under section 9(1A) of the 1967 Act, and not section 9(1), was immaterial. Under section 9(1), the initial reversion was to an extended lease for a term of 50 years at a high modern ground rent. That rent was fixed by reference to the capital value of the land and the house standing upon it. There was no logical reason why the deferment rate under section 9(1) should differ from that applicable under section 9(1A), where the reversion was to both the land and the building. [7] In Sportelli, it was explained that the deferment rate was made up of three elements: the risk-free rate, the real growth rate and the risk premium. The risk-free rate must be the same under section 9(1) and section 9(1A). The real growth rate must also be the same. If anything, land values were more secure than house values. In some of the instant cases, the LVT had suggested that real growth rates were expected to be lower in the West Midlands than in central London. That view had not been supported by evidence and had not been quantified by the LVT. It was no more than a hunch. Indeed, in recent decisions under the Leasehold Reform, Housing and Urban Redevelopment Act 1993 (the 1993 Act), relating to flats at Kelton Court, Edgbaston and 24 Whittington Grove, Stechford, the LVT had rejected the leaseholders’ argument that the 5% rate set for flats in Sportelli should be varied because a different risk premium was applicable to Birmingham. [8] In each of the current cases, the LVT had concluded that the risk premium should be higher under section 9(1) because of the relative advantage of potential vacant possession on expiry in a case under section 9(1A). Mr Davis did not agree. The purchaser of a section 9(1A) reversion, if available, would be acquiring a high-value house. The hypothetical investor would consider that this would be putting too many eggs in one basket. A section 9(1) freehold, on the other hand, would appeal to smaller investors, who would be attracted by the increase in value as the unexpired term reduced, together with a potential increase in house values. [9] What had to be identified (if it existed) was a factor within the risk premium that would lead to a different conclusion being reached under section 9(1) than under section 9(1A). It was clear from Sportelli that the factors making up the risk premium were volatility, illiquidity, deterioration and obsolescence. There was no evidence or other reason to suppose that the rental value of a site was more volatile than the value of the house and site together. Nor was a reversion to a site more illiquid than a reversion to a house and site. The reversionary element was tradeable, whether it was to vacant possession value or to an income stream. A site was, if anything, less likely to deteriorate than a house and (unlike a house) would not be subject to obsolescence. If anything, therefore, there was a case for a lower deferment rate under section 9(1), although the appellants were content to seek the same rate. [10] Mr Davis had never seen a section 9(1A) ground rent offered for sale. On the other hand, there was a strong market for freehold ground rents secured on houses and flats. This demand had increased over the past 10 to 15 years. He produced details of the prices achieved by Cottons at auction in October 2008 for section 9(1) freehold ground rent investments in Dudley. The auctioneer’s analysis showed that the price paid reflected a deferment rate below 4.75%. Discussion and conclusions [11] Many of the LVTs whose decisions form the subject of these appeals considered that Sportelli did not provide the appropriate starting point for valuations under section 9(1). Their general approach is summarised in the following passage, in [46] from the decision on 30 Beech Avenue: We note the Members in Sportelli (LT) at para 8, say “Nothing that is said in this decision has any direct application to capitalisation rates.” The question before us is the appropriate deferred capitalisation rate, namely a capitalisation rate, not a deferment rate, as it is the capitalisation rate which is deferred, not a capital sum. [12] I do not think that that is a correct analysis of the position. In arriving at the price payable, it is necessary for the valuer to ascertain the section 15 modern ground rent and then to capitalise that rent, deferred for the unexpired term of the existing term. The modern ground rent will be payable for 50 years and be subject to review after 25 years. However, the generally recognised method of approach is to capitalise the section 15 rent as if in perpetuity, deferred for the period of the unexpired term of the existing tenancy; not seeking to quantify any different rent that might become substituted at the expiry of 25 years from the original term date, and not quantifying separately the value in reversion at the expiry of 50 years from the original term date: see Farr v Millersons Investments Ltd (1971) 22 P&CR 1055*. ————————————————————————— * Editor’s note: Also reported at (1971) 218 EG 1177 ————————————————————————— [13] In every one of the 22 cases under consideration, the LVT used the same percentage 5.5% when decapitalising the site value to arrive at the modern ground rent as it did when capitalising and deferring that rent. It has not been suggested that it was wrong to do so. Indeed, in para 9-11 of Hague on Leasehold Enfranchisement (4th ed), the learned editors state: It is settled (Official Custodian of Charities v Goldridge (1973) 26 P&CR 191, CA; Wilkes v Larcroft Properties [1983] 2 EGLR 94, CA) that, in the absence of any evidence to contrary effect, the percentage rate to be adopted for capitalisation and deferment should be the same rate as that adopted for decapitalising the site value to ascertain the section 15 rent. [14] The effect of this approach is that although, in theory, the valuer is capitalising a ground rent payable on reversion, in practice he is deferring a capital sum — the site value — receivable on the termination of the existing lease. In those circumstances, any guidance on the deferment rate given by this tribunal in Sportelli, which the Court of Appeal held should be followed by LVTs, is to be followed in cases under section 9(1), as well as in those under section 9(1A). |page:89| [15] In Sportelli, the LT concluded that the generic deferment rate should be 4.75% ([79]), that this should be increased by 0.25% for flats ([95]) and that these rates were constant beyond 20 years ([85]). In [123], the LT observed: The application of the deferment rate of 5% for flats and 4.75% for houses that we have found to be generally applicable will need to be considered in relation to the facts of each individual case. Before applying a rate that is different from this, however, a valuer or an LVT should be satisfied that there are particular features that fall outside the matters that are reflected in the vacant possession value of the house or flat or in the deferment rate itself and can be shown to make a departure from the rate appropriate. [16] In the Court of Appeal, Carnwath LJ agreed that this general guidance was indeed appropriate. In [99], he said: I agree with the Tribunal that an important part of its role is to promote consistent practice in land valuation matters. It was entirely appropriate for the Tribunal to offer guidance as they have done in this case, and, unless and until the legislature intervenes, to expect leasehold valuation tribunals to follow generally that lead. [17] This approval by the Court of Appeal, however, was qualified. In [102], Carnwath LJ said: The tribunal’s later comments on the significance of their guidance do not distinguish in terms between the PCL area and other parts of London or the country. However, there must in my view be an implicit distinction. The issues within the PCL were fully examined in a fully contested dispute between directly interested parties. The same cannot be said in respect of other areas. The judgment that the same deferment rate should apply outside the PCL area was made, and could only be made, on the evidence then available. That must leave the way open to the possibility of further evidence being called by other parties in other cases directly concerned with different areas. The deferment rate adopted by the tribunal will no doubt be the starting point; and their conclusions on the methodology, including the limitations of market evidence, are likely to remain valid. However, it is possible to envisage other evidence being called, for example, on issues relevant to the risk premium for residential property in different areas. That will be a matter for those advising future parties, and for the tribunals, to consider as such issues arise. [18] Although, in each of the appeals now under consideration, the LVT decided that the Sportelli generic rate of 4.75% should be revised to 5.5%, the reasons for the increase were not always the same. In all cases, the increase was attributed to the distinction between the reversionary positions under section 9(1) and 9(1A). In 10 cases, however, (LRA/38, 39, 59, 72, 73, 92, 109, 111, 141 and 142/2008), the LVT’s decision also reflected its conclusion that a higher rate should be adopted than that which would be appropriate in the PCL area. [19] In deciding whether a departure from the 4.75% generic rate is justified in the present appeals, therefore, two questions must be answered. First, are the factors that led the LT to determine 4.75% in Sportelli — where it was concerned with enfranchisement pursuant to section 9(1A) of the 1967 Act and the provisions of the 1993 Act — sufficiently different from those that would apply in valuations under section 9(1)? Second, is there any evidence to justify a deferment rate for houses in the West Midlands that is different from that applying to houses in the PCL area? [20] I consider first the difference between sections 9(1) and 9(1A). As Mr Davis pointed out, the LT in Sportelli found that it needed to establish three components of the deferment rate. The first was the risk-free rate, defined as the return demanded by investors for holding an asset with no risk, often proxied by the return on a government security held to redemption. The LT concluded that this rate should be 2.25%. Mr Davis considered that the risk-free rate should be the same under sections 9(1) and 9(1A) and I see no reason to disagree. [21] The second component of the deferment rate was the real growth in house prices. On this, the LT concluded, in [72], that: a realistic, or neutral, assumption would be 2%… with any concern on the part of the investor that this rate might not be achieved being reflected in the risk premium. Again, Mr Davis’s opinion, that there was no justification for adopting a different growth rate depending upon whether the reversion was to site value or building value, seems to me to be entirely reasonable. [22] The final component of the deferment rate was the risk premium, or the additional return required by investors to compensate for the risk of not receiving a guaranteed return. The tribunal concluded that, in forming an overall assessment of the premium that would be required by investors in the type of asset that it was considering, it was necessary to have regard to the individual components of the risks of investment in long reversions. These were volatility, illiquidity, deterioration and obsolescence. Of these components, the tribunal concluded that physical deterioration and obsolescence were factors that required to be reflected in the generic deferment rate to the extent that the risk related to them was common to all residential property viewed in the long term. [23] Mr Davis’s view was that there was an argument for a lower deferment rate under section 9(1) because a site was not subject to obsolescence in the way that a house was and was less likely to deteriorate than a house. I think that Mr Davis is right on this point. [24] The remaining components of the risk premium were volatility and illiquidity. In Sportelli, in [76], the LT considered that the combined effect of these factors must have the major effect upon the risk premium. It did not think that in the market that it had to envisage: there would be any significant number of investors that would be looking to hold these very long-term assets throughout their lives. The attraction of the investment would be its relative security, the prospect of growth and the opportunity for both long-term retention and earlier sale. Tradeability would, we think, be important as one of its components, and it is this that would make the volatility of the housing market and the relative illiquidity of the investment significant factors in the mind of a purchaser. In the LT’s judgment, in [77]: since real house prices are shown to be prone to shocks and to be strongly cyclical, with persistent periods of negative growth, an investor in a long-term reversion would be very conscious of the risk that the market could be depressed at the point at which he wished to sell his interest, even though, as compared with equities, the residential property market is rather less volatile. Reversions would suffer, in comparison with equities, from illiquidity resulting from high transaction costs and the length of time to complete a transaction. The latter factor would, we think, be perceived as adding substantially to the risk associated with volatility. [25] The LT concluded that the market for house reversions would require a risk premium of 4.5%. Combined with a risk-free rate of 2.25% and a real growth rate of 2%, this produced the generic deferment rate of 4.75%. [26] In Mr Davis’s opinion, the rental value of a site was no more volatile than the capital value of a house and a reversion to a site was not more illiquid than one to a house. I am unable to accept that conclusion. Ground rental value is the annual equivalent of site value. The latter is the amount that remains after building and other development costs (including an allowance for profit) are deducted from the value of the completed building. The nature of such a residual calculation means that a gearing effect operates. An increase in the estimated value of the completed house is likely to result in a more than a proportionate increase in the residual site value, and vice versa. There would be a corresponding increase in the risk were the market to be depressed when the investor decided to sell. There might also be a resultant increase in the time needed to achieve a sale of such an investment. [27] Since the reversion in the case of section 9(1) is to a ground rent only, a potential purchaser is likely to require a higher risk premium to compensate for the increased volatility and illiquidity than if the reversion also included a house standing on the site. The increased risk would, however, be offset to some extent by the reduced risk of deterioration and obsolescence. I find that the overall result would be to increase the risk premium to 4.75% and thus to increase the deferment rate to 5%. |page:90| [28] I turn to the effect upon the deferment rate of the location of the appeal properties. In [88] of Sportelli, to which Carnwath LJ was referring in his remarks quoted in [17] above, the LT said, in [86]: Although we accept the view of the valuers that the deferment rate could require adjustment for location, on the evidence before us we see no justification for making any adjustment to reflect regional or local considerations either generally or in relation to the particular cases before us. The evidence of the financial experts suggests that no adjustment to the real growth rate is appropriate given the long-term basis of the deferment rate, and locational differences of a local nature are, in the absence of clear evidence suggesting otherwise, to be assumed to be properly reflected in the freehold vacant possession value. [29] Since those observations were made in the Court of Appeal, the LT has had to consider the appropriate deferment rate to be adopted in four cases outside the PCL area in which the existing term exceeded 20 years’ unexpired. All four decisions related to enfranchisements under the 1993 Act, not the 1967 Act. In Hildron Finance Ltd v Greenhill Hampstead Ltd [2008] 1 EGLR 179, the LT (HH Judge Reid QC and Mr Norman Rose FRICS) decided that there was no justification for departing from the Sportelli deferment rate of 5% when valuing a block of flats in Hampstead. The same conclusion was reached in Daejan Investments Ltd v The Holt (Freehold) Ltd LRA/133/2006 unreported 2 May 2008 (HH Judge Huskinson and Mr Andrew Trott FRICS), concerning a block of flats in Merton London Borough Council and in Cik v Chavda LRA/111/2007 unreported 7 August 2008 (Mr George Bartlett QC, president, and Mr Paul Francis FRICS) that related to a block of flats in Hounslow, Middlesex. The fourth case, Re Baronet Nicholson LRA/29/2006 unreported 8 January 2007 concerned a purpose-built development of ground-floor retail shops and 11 flats above in Calthorpe Road, Edgbaston. The LT (the president and Mr Andrew Trott FRICS) again held that there were no special factors that would make it appropriate to adopt a deferment rate other than 5% for the lease of one flat with 25 years’ unexpired. [30] Mr Davis considered that there was no justification for departing from the Sportelli deferment rate of 4.75% when valuing the appeal properties in order to reflect their location in the West Midlands. I drew his attention to the first instance decision concerning 30 Beech Avenue, where the LVT had been provided with average house price figures compiled by Nationwide Building Society for inner London and the West Midlands. These suggested that, in the fourth quarter of 1952, the ratio between the two was 1.37:1. This had increased to 1.84:1 by the fourth quarter of 2007. Mr Davis replied that no reliance could be placed upon figures from only one source. [31] In its decision on 30 Beech Avenue, the LVT said, in [41]: We find we should be cautious in relying solely on a mathematical analysis and extrapolation of statistical trends, because valuation is an art, not a science, involving an element of judgment; and particularly because, in the case before us, Mr Moyle’s method includes subjective adjustments and relies on statistics (Nationwide statistics) which have, over 56 years, been derived from figures which are weighted and the weighting has been changed on four occasions; further, it is admitted the statistics include dissimilar types of houses and may even include studio flats. As we say earlier… the greater the number of adjustments the less reliable is the evidence; the adjustments in Mr Moyle’s calculations are numerous. Hence we are cautious. Having thus warned itself against relying upon the Nationwide statistics, the LVT nevertheless concluded that the real growth rate for property in the West Midlands had been less than in PCL. [32] If it was right to draw conclusions from a single set of figures, the Nationwide statistics strongly suggest that, over a period of some 55 years, house price growth was significantly slower in the West Midlands than in central London. I do not consider, however, that this information on its own is sufficient to justify an increase in the generic deferment rate for houses in the West Midlands. As the LVT pointed out, the Nationwide statistics had been derived from weighted figures and the weighting had been changed on four occasions. They also included dissimilar types of houses and studio flats. I do not have enough information to be able to decide whether these factors materially affect the conclusion to be drawn from the statistics. Moreover, before one could be drawn, it would also be necessary to ascertain whether a different pattern emerged if one looked at movements over a 50-year period commencing in different years and in different quarters between, say, 1952 and 1957: see Hildron, in [39]. [33] There is, therefore, insufficient evidence before me to displace the Sportelli rate of 4.75% on the ground of location. I was told, however, that a significant number of other cases are awaiting the outcome of these appeals. In those circumstances, it is appropriate for me to emphasise that the conclusions that I have reached on this occasion have necessarily been arrived at without the benefit of expert evidence on behalf of the leaseholders. They have also been made with inadequate information concerning the Nationwide statistics and without knowing whether any other relevant statistics exist. Valuers who give evidence in similar cases in the future – whether before the LVT or the LT – will no doubt bear in mind their professional duty to investigate as fully as possible the matters to which I have referred before forming a conclusion as to whether the first impression that I have obtained from the Nationwide statistics fairly reflects past patterns of growth. [34] I am also concerned with an appeal against the capitalisation rate of 6% determined by the LVT in respect of 25 Inchford Road. In this case, the valuation date was 7 June 2007. At that date, the annual ground rent was £75, rising to £150 in 2009 and £300 from 2042 until the termination of the lease in 2075. [35] Mr Davis said that the factors to be taken into account in setting the capitalisation rate were length of lease, security of recovery, size of ground rent and the provision for and nature of the rent review. The current ground rent was not nominal, it was due to double in June 2009 and to double again in 2042. The amounts of rent payable were fixed and there should be no problem in collecting them. It was common to pay this type of ground rent by standing order. [36] In Mr Davis’s opinion, it would be correct to associate the capitalisation rate used with the rate obtainable from a high street bank or building society. His report was dated 23 September 2008. At that date, he said, rates ranged from 3% to 6.25%. He considered that this was an attractive investment linked to a reversionary interest. In his opinion, the capitalisation rate to adopt was 5.25%. [37] Mr Davis said that guidance was required from the LT as to the capitalisation rate for an escalating ground rent with fixed increases. I would be reluctant to provide such guidance without the benefit of expert evidence from both sides, unless it is absolutely necessary to do so. In this case, Mr Davis has failed to satisfy me that his suggested rate of 5.25% is more reliable than the LVT’s 6%, given that both figures fall within his quoted range of 3-6.25%. In any event, I would need to be persuaded that those rates – which are presumably paid for short-term deposits – are relevant to the valuation of a fixed interest security with 68 years’ unexpired. [38] I determine that the deferment rate to be used in valuing the 22 appeal properties should be 5%. The appeals on the deferment rate succeed. The appeal against the capitalisation rate used by the LVT in the case of 25 Inchford Road fails. The prices payable for the enfranchisement of the appeal properties are set out below. The relevant calculations appear in appendix 2. Address 512 Haslucks Green Road, Shirley, Solihull, B90 1DN 25 Inchford Road, Solihull, B92 9QD 89 Rowood Drive, Damsonwood, Solihull, B92 9NN 38 Rowood Drive, Damsonwood, Solihull, B92 9LU 19 Ingham Way, Harborne, Birmingham, B17 8SW 93 Reindeer Road, Tamworth, B78 3SW 78 Old Oscott Hill, Birmingham, B44 9SP 5 Greenslade Road, Sedgley, Dudley, DY3 3QL 5 Elmwood Rise, Sedgley, Dudley, DY3 3QJ 17 Belmont Close, Tipton, DY4 9PJ 213 Nuthurst Road, Birmingham, B31 4TG 70 Greenacres Road, Kings Norton, Birmingham, B38 8NH 98 Reindeer Road, Fazeley, Tamworth, B78 3SP 7 Barford Close, Redditch, B98 0BA |page:91| 61 Maisemore Close, Redditch, B98 9LN 8 Northfield Close, Redditch, B98 9NJ 15 Latchford Close, Redditch, B98 9NQ 89 Donnington Close, Redditch, B98 8QE 30 Beech Avenue, Quinton, Birmingham, B32 2UB 7 Farriers Mill, Pelsall, Walsall, WS3 4QZ 64 Pooley View, Polesworth, B78 1BP 77 Pooley View, Polesworth, B78 1BT £5,549 £7,533 £4,163 £4,755 £6,323 £4,199 £13,767 £5,578 £5,233 £2,881 £4,770 £12,899 £4,154 £3,521 £2,783 £2,353 £3,714 £2,683 £17,828 £2,121 £4,544 £4,087 Appendix 1 Ref Address Freeholder Leaseholder LVT valuation Appellants’ valuation LRA/185/07 512 Haslucks Green Road, Shirley, Solihull, B90 1DN Mansal Securities Ltd John Thomas Henry Evans and Janet Pamela Evans £4,480 £6,472 LRA/29/08 25 Inchford Road, Solihull, B92 9QD JGS Properties Ltd Frank Michael Butler and Linda Diane Butler £5,832 £8,365 LRA/38/08 89 Rowood Drive, Damsonwood, Solihull, B92 9NN Sidewalk Properties Ltd Mrs PM Swann £3,334 £4,720 LRA/39/08 38 Rowood Drive, Damsonwood, Solihull, B92 9LU Sidewalk Properties Ltd Mr PJ and Mrs M Fidoe £3,560 £5,014 LRA/51/08 19 Ingham Way, Harbone, Birmingham, B17 8SW The Calthorpe Edgbaston Estate Jasvinder Singh Deol £4,613 £6,694 LRA/55/08 93 Reindeer Road, Tamworth, B78 3SW Sidewalk Properties Ltd Karl David Lakin £3,369 £4,807 LRA/59/08 78 Old Oscott Hill, Birmingham, B44 9SP Business Flats Ltd Kathleen June Harris £12,134 £14,412 LRA/72/08 5 Greenslade Road, Sedgley, Dudley, DY3 3QL Sidewalk Properties Ltd Mr PH Ashwood and Mrs D Ashwood £4,129 £6,046 LRA/73/08 5 Elmwood Rise, Sedgley, Dudley, DY3 3QJ Sidewalk Properties Ltd Mr WRS Duggan and Mrs MJ Duggan £4,523 £6,539 LRA/78/08 17 Belmont Close, Tipton, DY4 9PJ Denetower Ltd Michael John Wilson and Dianne Lynne Wilson £2,227 £3,044 LRA/91/08 213 Nuthurst Road, Birmingham, B31 4TG Soundmanor Ltd Mr RAA Unwin £3,966 £5,423 LRA/92/08 70 Greenacres Road, Kings Norton, Birmingham, B38 8NH Business Flats Ltd Barry Dean and Brian Dean £11,394 £13,844 LRA/109/08 98 Reindeer Road, Fazeley, Tamworth, B78 3SP Sidewalk Properties Ltd Mr PA Chubb £3,374 £4,827 LRA/110/08 7 Barford Close, Redditch, B98 0BA Sidewalk Properties Ltd Mr and Mrs DM Chilton £2,831 £3,882 LRA/111/08 61 Maisemore Close, Redditch, B98 9LN Sidewalk Properties Ltd Mr P Atherley and Mrs CL Atherley £2,404 £3,361 LRA/112/08 8 Northfield Close, Redditch, B98 9NJ Sidewalk Properties Ltd Mr IR Sweeney and Ms K Richards £1,850 £2,546 LRA/113/08 15 Latchford Close, Redditch, B98 9NQ Sidewalk Properties Ltd Mr AG Gilbert and Mrs SM Gilbert £2,930 £4,193 LRA/114/08 89 Donnington Close, Redditch, B98 8QE Sidewalk Properties Ltd Deborah Ann Boucher £2,200 £3,012 LRA/117/08 30 Beech Avenue, Quinton, Birmingham, B32 2UB Denric Securities Ltd Brian Hemming £15,710 £18,827 LRA/124/08 7 Farriers Mill, Pelsall, Walsall, WS3 4QZ Linecroft Ltd Mr DE Cox and Mrs LJ Cox £2,051 £2,410 LRA/141/08 64 Pooley View, Polesworth, B78 1BP DG Lewis Estates Ltd Mr SJ Scarsbrook and Mrs EA Scarsbrook £3,590 £5,184 LRA/142/08 77 Pooley View, Polesworth, B78 1BT DG Lewis Estates Ltd Paula Clare Aldred £3,194 £4,612 |page:92| Appendix 2: Valuations by the Lands Tribunal LRA/185/2007 512 Haslucks Green Road, Shirley, Solihull, B90 1 DN Term Capitalised ground rent (not appealed) £509 Reversion Site value (not appealed) £84,000 PV £1 deferred 57 yrs @ 5% 0.06 £5,040 £5,549 LRA/29/2008 25 Inchford Road, Solihull, B92 9QD Term Ground rent capitalised @ 6% per LVT decision £2,593 Reversion Site value (not appealed) £123,500 PV £1 deferred 68 yrs @ 5% 0.04 £4,940 £7,533 LRA/38/2008 89 Rowood Drive, Damsonwood, Solihull, B92 9NN Term Capitalised ground rent (not appealed) £599 Reversion Site value (not appealed) £59,400 PV £1 deferred 57.5 yrs @ 5% 0.06 £3,564 £4,163 LRA/39/2008 38 Rowood Drive, Damsonwood, Solihull, B92 9LU Term Capitalised ground rent (not appealed) £597 Reversion Site value (not appealed) £59,400 PV £1 deferred 56 yrs @ 5% 0.07 £4,158 £4,755 LRA/51/2008 19 Ingham Way, Harborne, Birmingham, B17 8SW Term Capitalised ground rent (not appealed) £373 Reversion Site value (not appealed) £85,000 PV £1 deferred 56 yrs @ 5% 0.07 £5,950 £6,323 LRA/55/2008 93 Reindeer Road, Fazeley, Tamworth, B78 3SW Term Capitalised ground rent (not appealed) £524 Reversion Site value (not appealed) £61,250 PV £1 deferred 57.33 yrs @ 5% 0.06 £3,675 £4,199 LRA/59/2008 78 Old Oscott Hill, Great Barr, Birmingham, B44 9SP Term Capitalised ground rent (not appealed) £65 Reversion Site value (not appealed) £44,200 PV £1 deferred 24.25 yrs @ 5% 0.31 £13,702 £13,767 LRA/72/2008 5 Greenslade Road, Sedgley, Dudley, DY3 3QL Term Capitalised ground rent (not appealed) £450 Reversion Site value (not appealed) £85,470 PV £1 deferred 58.75 yrs @ 5% 0.06 £5,128 £5,578 LRA/73/2008 5 Elmwood Rise, Sedgley, Dudley, DY3 3QJ Term Capitalised ground rent (not appealed) £373 Reversion Site value (not appealed) £81,000 PV £1 deferred 55.5 yrs @ 5% 0.06 £4,860 £5,233 LRA/78/2008 17 Belmont Close, Tipton, DY4 9PJ Term Capitalised ground rent (not appealed) £909 Reversion Site value (not appealed) £49,300 PV £1 deferred 67.67 yrs @ 5% 0.04 £1,972 £2,881 LRA/91/2008 213 Nuthurst Road, Birmingham, B31 4TG Term Capitalised ground rent (not appealed) £95 Reversion Site value (not appealed) £42,500 PV £1 deferred 44.75 yrs @ 5% 0.11 £4,675 £4,770 LRA/92/2008 70 Greenacres Road, Kings Norton, Birmingham, B38 8NH Term Capitalised ground rent (not appealed) £81 Reversion Site value (not appealed) £49,300 PV £ 1 deferred 27.5 yrs @ 5% 0.26 £12,818 £12,899 LRA/190/2008 98 Reindeer Road, Fazeley, Tamworth, B78 3SP Term Capitalised ground rent (not appealed) £479 Reversion Site value (not appealed) £61,250 PV £1 deferred 57 yrs @ 5% 0.06 £3,675 £4,154 LRA/110/2008 7 Barford Close, Matchborough East, Redditch, B98 0BA Term Capitalised ground rent (not appealed) £929 Reversion Site value (not appealed) £51,850 PV £1 deferred 61.75 yrs @ 5% 0.05 £2,592 £3,521 LRA/111/2008 61 Maisemore Close, Church Hill, Redditch, B98 9LN Term Capitalised ground rent (not appealed) £920 Reversion Site value (not appealed) £62,125 PV £1 deferred 69.75 yrs @ 5% 0.03 £1,863 £2,783 LRA/112/2008 8 Northfield Close, Church Hill North, Redditch, B98 9NJ Term Capitalised ground rent (not appealed) £823 Reversion Site value (not appealed) £51,000 PV £1 deferred 73 yrs @ 5% 0.03 £1,530 £2,353 |page:93| LRA/113/2008 15 Latchford Close, Church Hill, Redditch, B98 9NQ Term Capitalised ground rent (not appealed) £1,050 Reversion Site value (not appealed) £88,800 PV £1 deferred 72 yrs @ 5% 0.03 £2,664 £3,714 LRA/114/2008 89 Donnington Close, Church Hill, Redditch, B98 8QE Term Capitalised ground rent (not appealed) £888 Reversion Site value (not appealed) £44,880 PV £1 deferred 65.75 yrs @ 5% 0.04 £1,795 £2,683 LRA/117/2008 30 Beech Avenue, Quinton, Birmingham, B32 2UB Term Capitalised ground rent (not appealed) £80 Reversion Site value (not appealed) £61,200 PV £1 deferred 25.5 yrs @ 5% 0.29 £17,748 £17,828 LRA/124/2008 7 Farriers Mill, Pelsall, Walsall, WS3 4QZ Term Capitalised ground rent (not appealed) £1,645 Reversion Site value (not appealed) £47,600 PV £1 deferred 89 yrs @ 5% 0.01 £476 £2,121 LRA/141/2008 64 Pooley View, Polesworth, B78 1BP Term Capitalised ground rent (not appealed) £449 Reversion Site value (not appealed) £68,250 PV £1 deferred 57.5 yrs @ 5% 0.06 £4,095 £4,544 LRA/142/2008 77 Pooley View, Polesworth, B78 1BT Term Capitalised ground rent (not appealed) £412 Reversion Site value (not appealed) £61,250 PV £1 deferred 57.75 yrs @ 5% 0.06 £3,675 £4,087 Appeal allowed.