Shina and others v Elghanian and another

Leasehold enfranchisement — Leasehold Act 1967 — Enfranchisement price — Section 9(1A) valuation — Improvements — Landlords’ enfranchisement costs — Whether interest payable The appellants owned the freehold of a residential property in Hampstead, London. In July 1990 the respondent tenants, who held a lease for 99 years from June 24 1894, served notice to acquire the freehold under the Leasehold Reform Act 1967. The respondents identified a number of tenants’ improvements, including a granny flat, additional bathroom, central heating, fitted kitchen, electrical rewiring, replacement fireplaces and an external parking area. On March 20 1998 the leasehold valuation tribunal determined the price payable under section 9(1A) of the Act at £317,000 and the landlords’ costs at £3,801.25. The landlords appealed contending for a price of £381,000 and that landlords’ costs should be £7,553.64; they also sought interest on the price under section 49 of the Arbitration Act 1996. Decision: The appeal was allowed in part; the enfranchisement price was determined at £323,000. A global sum of £20,000 fully reflected the tenants’ improvements. The term was valued at 6% and the reversion deferred at the same rate. The value of the reversion after deducting tenants’ improvements was £390,000, from which a 10% discount was deducted to reflect the risk of the tenants holding over. The marriage value was split at 50%. The landlords failed to prove that the costs determined by the LVT under section 9(4) were wrong; it was not sufficient merely to submit that, in the absence of evidence of unreasonableness, admittedly incurred professional fees should be considered reasonable. Section 49(3) of the Arbitration Act 1996 only applies in cases where the Lands Tribunal is empowered to make an award of a sum of money. In determining the enfranchisement price under the 1967 Act, the tribunal is not making an award of a sum of money. Interest was not awarded. Kevin Farrelly (instructed by Bernard Oberman & Co) appeared for the appellants; Matthew Caswell (instructed by Davis Frankel & Mead) represented the respondents. Giving his decision, MR GEORGE BARTLETT QC, president, said: This is an appeal by the freeholders of a house known as 43 Arkwright Road, Hampstead, London NW3 (the subject property), against a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (the LVT) given on 20 March 1998. The respondent leaseholders hold the property of the appellants under a lease dated 19 November 1896 for a term of 99 years from 24 June 1894, at a fixed annual ground rent of £25. On 6 July 1990 they gave written notice under section 8 of the Leasehold Reform Act 1967 to the landlord, Mr Y Mussaffi, of their desire to have the freehold. Mr Mussaffi has since died and the respondents succeeded to his interest under the terms of his will. The parties were unable to agree upon the price to be paid for the freehold interest under the provisions of section 9(1A) of the Act or upon the landlords’ costs, to be borne by the tenants under section 9(4) of the Act, and application was made to the LVT. In its decision, the LVT determined the enfranchisement price at £317,500 and the landlords’ costs at £3,801.25. Before me, the contentions of the appellants were that the price to be paid for the freehold should be £381,000; that the landlords’ costs should be £7,553.64; and that interest should be awarded to them under section 49 of the Arbitration Act 1996. The respondent leaseholders contended that the decision of the local valuation tribunal should be upheld. The property comprises a substantial semi-detached brick building standing principally on ground and two upper floors, with a gross floor area of approximately 4,230 sq ft. The uppermost floor lies within a slated mansard roof. To the rear of the building is a garden, about 100ft deep, consisting mainly of lawn, and, in the front, the building is set back from the pavement behind a forecourt, which provides off-street parking for three to four cars. Although changes have occurred since the notice was served on 6 July 1990, it is assumed by both parties that, at that date, the property comprised a single residence containing, on the ground floor, a hall, three rooms, a kitchen, a utility room, a WC, a shower room and a self-contained suite of a living room, with kitchen facilities, a bedroom and a shower room; and, on each of the two upper floors, five rooms and a bathroom. Arkwright Road is a residential road containing, for the most part, large houses of about 100 years old. It runs downhill from Fitzjohn’s Avenue in the north-east to Finchley Road in the south-west. About 200m to the north-east of the subject property it is intersected by Frognal. Finchley Road is about 75m from the subject property, separated from it by the semi-detached number 45 and the detached 47 Arkwright Road, both of which are of similar design to number 43, and by a block of flats, Arkwright Mansions. Finchley Road is a main traffic route dividing the NW3 postal district from NW6, and it contains shops and other commercial premises. All the above matters are agreed or come from uncontested evidence. There is no disagreement between the parties that, in assessing the enfranchisement price, the marriage value of the landlords’ and the tenants’ interests should be shared equally, and that 6% should be taken for the purposes of both capitalising the ground rent and deferring the value of the reversion. There is also agreement that in valuing the reversion the Lloyd-Jones discount of 10% (see Lloyd-Jones v Church Commissioners for England (1981) 261 EG 471*) should be taken to reflect the risk of the tenants holding over. The issues between the parties are these: (1) The enfranchisement price, and in particular — (a) The open market value of the unencumbered freehold. (b) The extent to which the value of the property has been increased by improvements carried out by the tenants. (c) The value of the tenants’ interest excluding the prospects of marriage. (2) The landlords’ reasonable costs under section 9(4). (3) Whether interest can and should be awarded. * Editor’s note: Also reported at [1982] 1 EGLR 209 The appellants’ valuation of £381,000 was that of MrCEJ Boston FSVA IRRV MCIM. The respondents’ valuer, Mr PC Benveniste FRICS ACIArb, produced two valuations, one of £256,000 and one of £251,250. These are reproduced as appendices to this decision. The value of the freehold Evidence for the appellant landlords on the open market value of the freehold at the relevant date (6 July 1990) was given by Mr JEJ Gambles BSc ARICS of Hamptons International. He was, he said, experienced in the valuation of residential property in central London, including, in particular, Hampstead and St John’s Wood. He had not seen the property in 1990, but he had seen photographs taken in 1990 that were produced to him on behalf of the tenants, and he thought it right to assume that the property was in similar condition to that when he inspected it in 1997. For the purpose of his valuation, he had obtained evidence from Hamptons’ Hampstead office sales ledger of a number of sales of houses in Hampstead during the period January 1990 to September 1991. He relied on the sales of some seven properties, and he produced the sales particulars relating to some of these. In order to relate the prices achieved to the relevant date, he had adjusted these by reference to Savills’ Prime Central London Property Index. This showed the movement of house prices in particular areas, the relevant one of which was Hampstead, St John’s Wood and Regent’s Park. Prices were falling throughout the period. Having adjusted the prices of his comparables in this way, he then took into account other differences between them and the subject property, including the type of house, size and location. An adjustment for location was necessary, he said, to reflect the fact that other areas of Hampstead are quieter and more desirable, away from Finchley Road, which, at the date of valuation, was comparatively poorly regarded. Having made these adjustments he arrived at a series of derived values for the subject property as at July 1990. He produced the following table showing this (see below). Ref no Property address Sale date Sale price Adjustment to July 1990 "Sale Price" Derived value at 43 Arkwright Road accounting for other variables: type, location, size 1 2 3 4 5 6 6 7 21 Frognal Lane 2 Eldon Grove 8 Wedderburn Road 6 Alvanley Gardens 20 Belsize Avenue 15 Maresfield Gardens 15 Maresfield Gardens 50 Belsize Avenue Jan 1990 Feb 1990 April 1990 July 1990 Sept 1990 July 1991 Sept 1991 Sept 1991 £620,000 £640,000 £700,000 £385,000 £450,000 £545,000 £572,000 £380,000 94.5% 95.1% 97.5% 100% 104% 115.9% 115.9% 115.9% £585,000 £608,000 £682,000 £385,000 £468,000 £631,000 £662,000 £440,000 £460,000 £500,000 £590,000 £440,000 £470,000 £475,000 £490,000 £460,000 Mr Gambles said that the derived values ranged between £440,000 and £590,000, with a mean of £468,000. If the highest and lowest figures were taken out, the spread was then from £460,000 to £500,000, with a mean of £475,000. He considered that the value of the subject property lay close to the mean range, that is between £468,000 and £475,000. In relation to20 Belsize Avenue, which the LVT had accepted as being the best comparable, he said that, in reaching his derived value for the subject property, he had included an allowance of 10% to reflect his belief that 20 Belsize Avenue was 10% larger. The sum of the room sizes in the particulars was 4,032 sq ft, and if 20% were added to this to reach an approximation of gross floor area, the resulting figure, 4,840 sq ft, could be compared to the gross floor area of the subject property of 4,230 sq ft. This would mean that 43 Arkwright Road was 87.3% of the area of 20 Belsize Avenue, and the difference, 12.7%, was sufficiently near to his 10% as to support it. In cross-examination Mr Gambles accepted that the subject property was at the ‘wrong end’ of Hampstead, being at the lower end of Arkwright Road. He agreed that Belsize Avenue was a better address than Arkwright Road, but he did not agree that it was a far superior location. Both locations suffered from the adverse effects of traffic, and in Belsize Avenue there was considerable pressure on parking. As compared with 20 Belsize Avenue, the subject property had the great advantage of having off-street car parking. For the tenants, evidence on the value of the freehold was given by Mr PS Berger FRICS, head of the professional services department at Goldschmidt & Howland, of Hampstead. He has been in practice at Hampstead for the last 21 years and has routinely carried out the valuation of residential properties in this area throughout that period. He considered that the value of the subject property at the relevant date was £350,000. He based himself on a valuation that he said he had made of  47 Arkwright Road, a very similar property in terms of age, size and type to number 43, but detached rather than semi-detached and closer to Finchley Road. He said that he had been asked in November 1990 by a firm of solicitors to provide them with a valuation for probate purposes, and he prepared a report and valuation dated2 October 1990. The solicitors informed him that the property was to be sold as soon as grant of probate was obtained, and therefore his valuation should be realistic. Accordingly, he valued in the sum of £300,000, and the solicitors subsequently told him that the property had been sold shortly afterwards for £290,000. He said that his daily working notebooks for that time had been lost but that he had copies and records of his valuations. He did not produce his report and valuation. In his view, the state of the residential market in 1990 was very poor, although by the summer of 1990 prices at the top end of the market had not fallen to the same extent as those at the lower end. In 1991 and 1992 prices at the top end fell at a faster rate than at the lower end. He considered that the subject property fell into the category of the lower end of the market, principally because of its location on the NW3/NW6 borders on a road that was already busy and close to the main Finchley Road. Mr Berger disagreed with Mr Gambles’ analyses of his comparable properties. He said that the current value of the subject property was £725,000. His firm had sold one of the comparables, 8 Wedderburn Road, for £2.180m in July 1998, and he said that 50 Belsize Avenue was currently for sale at an asking price of £880,000. He set out his opinion of the current value of all the comparable properties, including 20 Belsize Avenue, which he thought was worth in the region of £1.250m. He considered that this was a superior house in a superior location to the subject property, in a tree-lined street and closer to shops, restaurants and the tube. While both locations were adversely affected by traffic, he thought that in 1990 Belsize Avenue was much quieter. Since then, the pedestrianisation of Belsize Village had led to increased traffic along Belsize Avenue. I have to say that I do not find this evidence to be of any assistance. Quite apart from the fact that it consists principally of Mr Berger’s opinion, unsubstantiated by any comparable evidence of current values, the possibility that the value of the properties may have increased at different rates over the eight-year period is so obvious as to render the exercise of no help in establishing the value of the subject premises in July 1990. Nor do I think that any weight can be attached to his evidence in relation to 47 Arkwright Road, in view of the circumstances of his valuation and the subsequent sale of which he spoke. This evidence is little more than anecdotal, and the circumstances of a valuation for probate and subsequent sale are not such as to suggest that the figures are any useful guide to open market values. It is necessary, therefore, to base a conclusion as to the value of the freehold on the evidence of Mr Gambles. I do not find the sale price of 21 Frognal Lane and 2 Eldon Grove to be of any assistance. Both these appear to be high-quality residences in particularly good parts of Hampstead. 6 Alvanley Gardens is a 1930s house on the wrong side of Finchley Road but with open views to the west across a large sports ground. In view of the obvious differences between it and the subject property, it does not seem to me to be of assistance as a comparable. I might have attached weight to 8 Wedderburn Road and 15 Maresfield Gardens had there been any evidence of their floor area, but absence of this evidence makes any comparison with the subject property impossible. Similarly, there is no evidence of the floor area of 50 Belsize Avenue. This leaves 20 Belsize Avenue as the only useful comparable. It is 12.7% larger than the subject property and is a more attractive building situated in more attractive surroundings. It suffers from traffic somewhat less than the subject property, but it does not have the advantage of off-street parking. It is on five floors, rather than the subject property’s three, which is a disadvantage. Taking all these factors into consideration, it appears to me that a downwards adjustment of 12.5% of 20 Belsize Avenue’s £468,000 would be appropriate, to give a value of, say, £410,000. Tenants’ improvements The second matter that arises is the extent to which the value of the house has been increased by improvements carried out by the tenants. The tenants had originally identified as such improvements the installation of central heating, a fitted kitchen, a granny flat and an additional bathroom. In the course of the LVT hearing, they added electrical rewiring works and replacement fireplaces. In the course of the evidence before me, they added the concreting of the parked area in the front garden of the house. They had stated that these works, excluding the concreting, cost £31,500, and the concrete would have cost £3,000. The appellants did not challenge the assertion that these works had been carried out or the claimed cost of doing so. Mr Gambles said, however, that, in his view, only a small uplift in value could be attributed to the central heating, fitted kitchen, granny flat and additional bathroom, which were of very poor quality and in some respects rudimentary. He placed a figure of £15,000 on the uplift in value. As far as the rewiring was concerned, he suggested that it would be wrong to assume that a house like this would not have had electricity installed when it was built in 1896, since, by 1900, there were 30 power stations providing electricity for London. The rewiring was, in any event, done so poorly — it was all surface-mounted — that an incoming purchaser would replace it and would reduce commensurately the price he would pay for the freehold. Similar considerations would apply to the other works. For the respondents, Mr PC Benveniste FRICS ACIArb, whose practice comprises residential property management and professional work associated with it, sought to uphold the figure of £30,000 that the LVT thought should be taken as the value of the improvements. As I understood him, he sought to add to this £3,000 to reflect the value of the concreting of the front garden. He agreed in cross-examination that the rewiring produced no add-on value. Mr Caswell submitted that, while the purchaser might, as MrGambles argued, replace all the items of improvement, he might choose to do this piecemeal, so that what had been done would be of use while such upgrading works were being carried out. In the light of the evidence and my inspection, I am satisfied that the works of improvement,  to which the respondents point, have no greater utility than that suggested by Mr Caswell. They would undoubtedly be replaced by a purchaser. I consider that a global figure of £20,000 would fully reflect the uplift in value that they produced. Value of tenants’ interest excluding prospects of marriage Evidence on the value of the tenants’ interest, excluding the prospect of marriage, was given by Mr CEJ Boston FSVA IRRV MCIM, senior partner of Boston Carrington Pritchard and a specialist in landlord and tenant work in and around central London, whose section 9 valuation on behalf of the appellants I will refer to later. He took issue with the LVT, which had said that no helpful evidence had been submitted on the question of the open market value of the leasehold interest, and had made its own estimate for this of £50,000. He said that, in practice, it was extremely difficult to produce open market evidence of a lease with three years unexpired where the value of that lease was not affected by rights conveyed by the Leasehold Reform Act 1967. Consequently, he produced a schedule of previous LVT decisions for a wide range of unexpired terms showing the relative values determined in each case. One of these, with an unexpired term of 3.5 years, approximated to the three years unexpired in the present case. This was for a flat at 71 Ashleigh Road, London SW14. He said that it was his experience that the percentage relativity for a flat is usually higher than for houses. In the Ashleigh Road decision the percentage relativity determined was 11.5%, and so, he said, if 3.5 years equates to 11.5%, then three years would logically equate to something less than 10%, particularly as the 3.5 years is a flat and three years is a house. Notwithstanding this, he took a relativity of 10%, and, applying this to the unimproved unencumbered value of the freehold of £460,000, he came to a leasehold value of £46,000. He accepted that the approach he adopted was not ideal, but, in the absence of any other evidence, it was better than basing a judgment on no evidence at all. For the respondents, Mr Benveniste reached a value for the leasehold interest that was composed of two elements. The first gave a value for the unexpired term of £9,699. This was derived by deducting from his estimate of a fair rent for the property (£4,000) the ground rent of £25 and capitalising the result at 11% over three years. The second element was the holding over value. This he derived by taking an open market rent (£10,000), deducting from it his fair rent (£4,000), and capitalising the £6,000 for 45 years at 12% to give a figure of £49,698, which, added to the unexpired term value of £9,699, produced a total for the leasehold interest of £59,397 or £59,400. Mr Benveniste said that he derived his fair rent of £4,000 from two five-bedroom mansion flats in Lymington Mansion, Lymington Road, London NW6, with fair rents determined by the rent assessment committee in January 1991 at £2,690 and £3,000 respectively. His open market rent of £10,000 he reached by taking account of the scarcity factor, which the fair rent discounted. He was of the opinion that this would have been of the order of 60%. The 45-year holding-over period reflected the life expectancy of the tenant, Mrs Elghanian, who, at the relevant date, was 36. Mr Benveniste’s approach seems to me to have a number of fundamental flaws. It is sufficient to refer to two of them. In the light of Curtis v London Rent Assessment Committee [1998] 3 WLR 1427*, which emphasised that the determination of a fair rent must have as its starting point a market rent (see per Auld LJ at p1448D) to derive, as Mr Benveniste seeks to do, a market rent from a fair rent by an inverse application of an assumed scarcity factor is self-evidently wrong. Second, the assumption that the scarcity factor will be maintained for 45 years and that a particular individual will remain living in the house for that period is, I have to say, implausible. * Editor’s note: Also reported at [1998] 1 EGLR 79; [1998] 15 EG 120 Mr Benveniste’s alternative approach was to adopt the LVT’s spot figure of £50,000. In my view, however, the better approach is that of Mr Boston. It was criticised by Mr Kevin Farrelly because it assumed that the value of the tenants’ interest bore a constant relationship to the value of the landlords’ interest. It does not seem to me, however, that such a relationship is necessarily implausible. The evidence on which Mr Boston based his 10% is, it must be emphasised, extremely scant, but it is the only evidence that there is, and, in the absence of any other dependable material, I accept the judgment of MrBoston that is based upon it. Tribunal’s valuation The above findings lead to a calculation of the enfranchisement price as follows: Term Ground rent Years purchase for 3.0 years at 6.0% £25 2.67301 £67 Reversion Open market value of unencumbered freehold Amount attributable to tenants’ improvements Value disregarding tenants’ improvements Discount to reflect risk of tenants holding over at 10% Deferred for 3.0 years at 6.0% £410,000 (£20,000) £390,000 (£39,000) £351,000 0.83962 £294,706 £294,773 Marriage Value Unencumbered freehold value disregarding improvements Less Value of landlords’ interest excluding prospects of marriage Value of tenants’ interest excluding prospects of marriage Landlords’ share of marriage value £390,000 £294,773 £39,000 (£333,773) £56,227 50.00% £28,113 £322,886 Enfranchisement price, say £323,000 I therefore determine as the enfranchisement price £323,000. Costs of enfranchisement Under section 9(4) of the 1967 Act, an enfranchising tenant has to bear (so far as they are incurred in pursuance of the notice to enfranchise): the reasonable costs of or incidental to any of the following matters:– (a) any investigation by the landlord of that person’s right to acquire the freehold; (b) any conveyance or assurance of the house and premises or any part thereof or of any outstanding estate or interest therein; (c) deducing, evidencing and verifying the title to the house and premises or any estate or interest therein; (d) making out and furnishing such abstracts and copies as the person giving the notice may require; (e) any valuation of the house and premises; The LVT determined the amount payable under this provision to be £3,801.25. In their statement of case to this tribunal, the appellants asserted that the correct quantification of the costs was £7,533.64. In their reply, the respondents denied that this was the correct quantification and submitted that the figure determined by the LVT was a fair assessment. Before me, Mr Farrelly’s submissions were very short. He said, first, that there was no dispute that the claimed costs had been paid by the appellants, and, second, that, in the absence of evidence of unreasonability, professional fees should be considered reasonable and the claimed costs allowed. He called no evidence on the issue. Mr Matthew Caswell, for the respondents, placed reliance on the decision of the LVT, which had devoted some 15 paragraphs to a detailed consideration of the submissions made by the parties on the costs issue. It does not seem to me that Mr Farrelly is right in his contention that, in the absence of any evidence that the professional fees were unreasonable, the claimed costs should be allowed. It is clear from the pleadings that the respondents denied that any more than the £3,801.25 determined by the LVT represented reasonable costs of, or incidental to, one or more of the matters set out in section 9(4). It was for the appellants to prove that this was wrong and to justify the figures for which they contended. They have failed to do this, and the appeal relating to section 9(4) costs therefore fails. Interest Under section 49(3) of the Arbitration Act 1996, which is applied to all proceedings before this tribunal other than references by consent, by r 32 of the Lands Tribunal Rules 1996 (as amended by the Lands Tribunal (Amendment) Rules 1997): The tribunal may award simple or compound interest from such dates, at such rates and with such rests as it considers meets the justice of the case — (a) on the whole or part of any amount awarded by the tribunal, in respect of any period up to the date of the award… Mr Farrelly submits that it is open to the tribunal under this provision to award interest to the landlords on the enfranchisement price, and he says that interest ought to be so awarded from the date of the section 8 notice, ie 6 July 1990. He accepts that, in a normal case, it would not be right to award interest, but he says that this case is exceptional in view of the long time that has elapsed since the section 8 notice was served and the fact that, since 1993, the tenants have been holding over, much to their advantage, at a rate of £25 pa. He refers to a mortgage application report of 10 November 1997 by the surveyors Lambert Smith Hampton, appended to the report of Mr Berger. This recorded that, at that date, the property had been converted into 13 bed-sitting rooms and a one-bedroom flat, and was let on 14 assured shorthold tenancies, producing an income of £1,510 per week. The only explanation for the very long time that elapsed between the service of the section 8 notice and the application to the LVT is, says Mr Farrelly, to be found in the report of Mr Boston to the LVT and appended to his report to this tribunal, where, after referring to the death of Mr Mussaffi, he says: I am advised that the reason this claim has taken so long to come before the tribunal is partly due to an inability to reach a negotiated settlement with the tenants and partly because of the length of time it has taken to obtain grant of probate. However, says Mr Farrelly, whatever the reasons for the delay, the fact is that the tenants have had the benefit of the property. They have sublet it and thereby earned income from it, and, while the subletting is contrary to the covenants in the lease, no action for forfeiture can be brought while the enfranchisement process is in train. He suggests that interest should be awarded either at a rate related to the income derived from the property or at the rate applicable to judgment debts. Mr Caswell submits that there is no power to award interest in such a case as the present. He says that it is a fundamental rule that there can be no award of interest on a sum of money that is not due. Here, the nature of the transaction is a proposed purchase by the tenant of the landlord’s freehold reversion. The function of the tribunal, the parties having failed to agree, is to determine a price and not to award a sum of money. No money is due until the purchase price has been determined, and even then, under section 9(3), the tenant is able to withdraw from the proposed purchase by giving notice to that effect within one month of the ascertainment of the purchase price. There can, says MrCaswell, be no question of interest running on a purchase price that has not been determined or has not become due, nor during the period that section 9(3) gives to the tenant to decide whether he wishes to proceed. Section 9 provides, he says, a comprehensive scheme, so that if a tenant withdraws under subsection (3), he is liable under subsection (3)(a) to compensate the landlord for loss suffered through the ineffective notice to purchase, while if the tenant exercises his option to proceed, he must pay the landlord the costs set out in subsection (4), and subsection (5) extends the landlord’s lien as vendor to liabilities of the tenant (including sums for which the tenant is liable under subsection (4)). Mr Caswell submits that if a purchaser were in default after completion, he would at common law only be liable for interest on the purchase price if there were express contractual provision to that effect. Section 35A of the Supreme Court Act 1981 gives the court power to award interest, but only in proceedings for the recovery of a debt or damages, and section 19A of the Arbitration Act 1950 (to which section 49 of the 1996 Act is the successor) does not, he submits, give a power to award interest that is wider than this, because the reference of a dispute to arbitration in England implied that the arbitration was to be conducted in accordance with English law in all respects. He relies for this proposition on President of India v La Pintada Compania Navigacion SA [1984] 2 All ER 773. The short answer to the appellants’ claim for interest, in my judgment, is that section 49(3) of the 1996 Act only applies in cases where the tribunal is empowered to make an award of a sum of money. In determining the enfranchisement price under section 9 of the 1967 Act, the tribunal is not making an award of a sum of money. The order of the tribunal, under which it determines the price, does not create a liability on the part of the tenant to pay that, or any, amount to the landlord. Under section 8, the landlord is obliged to convey the freehold to the tenant at the price determined (subject to the tenant’s right under section 9(3) to withdraw), and the obligation of the tenant to pay the price comes into existence at the time the property is conveyed, but not before. It is, I think, obvious that there could be no question of an award of interest on the purchase price in relation to a period before the time at which the price became payable. I would add that, even if there were power in the tribunal to award interest as sought by the landlords, as a matter of discretion it would, in my view, be wrong to do so. The fact that the local valuation tribunal has no power to award interest would suggest that exceptional circumstances would be needed before the Lands Tribunal on appeal should do so. It was open to the landlords at any time to refer the question of the price to the local valuation tribunal for determination, and the evidence of Mr Boston, which I have quoted, is wholly insufficient evidence that there was something that prevented them from doing so. Decision The appeal is allowed to the extent that it relates to the enfranchisement price, which is determined to be £323,000. The appeal is dismissed in relation to the landlords’ costs of enfranchisement. This decision determines the substantive issues raised between the parties, and the tribunal’s award is final. The parties are invited to make submissions as to the costs of this reference, and a letter accompanies this decision as to the procedure for submissions in writing. Any order that is made as to costs will form an addendum to this decision. The right of appeal under section 3(4) of the Lands Tribunal Act 1949 and Rules of the Supreme Court Ord 61 will not arise until the decision has been completed by the determination of the question of costs. Addendum on costs Each party asks for costs. Having considered the submissions made, I attach particular weight to the following considerations: (a) The appellants were successful in relation to the leasehold enfranchisement price, but the amount determined exceeded that in the LVT decision by a relatively small amount. (b) The respondents’ evidence on the enfranchisement price was of very little assistance. (c) The appellants failed on the issues of the costs of enfranchisement and interest under the Arbitration Act. In the light of these considerations, I am satisfied that there should be no order for costs. Mr Boston’s valuation £ £ Term Ground rent Years purchase for 3.0 years at 6.0% £25 2.67301 £67 Reversion Open market value of unencumbered freehold Amount attributable to tenant’s improvements Value disregarding tenant’s improvements Discount to reflect risk of tenant holding over at 10% Deferred for 3.0 years at 6.0% £475,000 (£15,000) £460,000 (£46,000) £414,000 0.83962 £347,602 £347,669 Marriage value Unencumbered freehold value disregarding improvements Less Value of landlord’s interest excluding prospects of marriage Value of tenant’s interest excluding prospects of marriage Landlord’s share of marriage value £460,000 £347,669 £46,000 (£393,669) £66,331 50.00% £33,166 £380,835 Enfranchisement price say £381,000 Mr Benveniste’s Valuation A £ £ Lessee’s interest (vide para 16 of the LVT’s decision 20 March 1998) Value of lessee’s interest Lessor’s interest Unexpired term Ground Rent YP for 3 years at 6% Reversion Freehold vacant possession value Less: value of lessee’s improvements Less: amount to reflect risk of holding over (10%) PV of £1 in 3 years at 6% 25 2.673 350,000 30,000 320,000 32,000 288,000 0.83962 50,000 67 241,810 Value of Lessor’s Interest Add Marriage Value Freehold vacant possession value disregarding lessee’s improvements Less: Value of lessor’s interest Value of lessee’s interest (per LVT) Lessor’s share of the marriage value (50%) 241,877 50,000 320,000 291,877 28,123 241,877 14,062 255,039 Enfranchisement Price ‘A’ say £256,000 Mr Benveniste’s Valuation B £ £ Lessee’s Interest (per PCB based on deemed profit rental) Value of lessee’s interest Lessor’s Interest Unexpired term Ground rent YP for 3 years at 6% Reversion Freehold vacant possession value Less: value of lessee’s improvements Less: amount to reflect risk of holding over (10%) PV of £1 in 3 years at 6% Value of lessor’s interest 25 2.673 350,000 30,000 320,000 32,000 288,000 0.83962 58,755 67 241,810 241,877 Add Marriage Value Freehold vacant possession value disregarding lessee’s improvements Less: Value of lessor’s interest Value of lessee’s interest (per PCB) Lessor’s share of the marriage value (50%) 241,877 59,400 320,000 301,277 18,723 9,362 251,239 Enfranchisement Price "B" £251,250 Valuation by the leasehold valuation tribunal £ £ Lessee’s Interest (vide para 16 of the LVT’s decision) Value of lessee’s interest Lessor’s interest Unexpired term Ground rent YP for 3 years at 6% Reversion Freehold vacant possession value Less: value of lessee’s improvements Less: amount to reflect risk of holding over (10%) PV of £1 in 3 years at 6% Value of lessor’s Interest 25 2.673 420,000 30,000 390,000 39,000 351,000 0.83962 50,000 67 294,707 294,774 Add Marriage Value Freehold vacant possession value disregarding lessee’s improvements Less: Value of lessor’s interest Value of lessee’s interest (per LVT) Lessor’s share of the marriage value (50%) 294,774 50,000 390,000 344,774 45,226 22,613 317,387 Enfranchisement price say £317,500