Trustees of Barry and Peggy High Foundation v Zucconi and another

Leasehold enfranchisement – Premium – Flat – Respondents applying for determination of premium payable for grant of lease extension – Appellants appealing against calculation of relativity – Whether FTT wrong to use average of five RICS Report graphs from outside prime central London – Whether updated Savills and Gerald Eve prime central London graphs to be considered – Appeal allowed The appellants were the freeholders of a block of flats at 30 Barrydene, Oakleigh Road, North Whetstone, London, a four-storey 1960s purpose-built block. The respondents were the lessees of flat 26, a two-bedroom first-floor flat in the building. They had exclusive use of a garage. The respondents held a leasehold interest which was granted from 24 June 1971 for a term of 99 years. The respondents applied to the first-tier tribunal (FTT) for the determination of the premium payable for the grant of a lease extension for the property under the provisions of the Leasehold Reform, Housing and Urban Development Act 1993. At the valuation date of 29 November 2017, there were 52.56 years unexpired. In the absence of any transaction evidence of the sale of comparable flats with similar unexpired terms to the subject property, both parties relied upon the use of graphs of relativity before the FTT. The respondents’ expert calculated a relativity of 79.21% by taking the exact average of all seven CEM graphs published by the RICS in October 2009. The appellants’ expert considered the Gerald Eve 1996 graph (unenfranchiseable); the Gerald Eve 2016 table of relativities (unenfranchiseable); the Savills 2002 graph and table (enfranchiseable); and the Savills graph and table 2016 (enfranchiseable and unenfranchiseable) to obtain a relativity of 79.5% (Gerald Eve) and 72.8% (Savills). Both graphs focused on data from prime central London. The FTT preferred the respondent’s approach in respect of relativity. It concluded that, as the property was not located in prime central London, the Gerald Eve and Savills graphs were not relevant, and the five RICS Greater London and England graphs should be used. The FTT took the average of those five graphs, discounting the two published research graphs prepared by the College of Estate Management and LEASE as they were purely research based. That provided a relativity of 78.93%. The FTT determined the freehold vacant possession (FHVP) value of the subject property at £558,586. That figure was not challenged on appeal. Only the relativity was disputed although that had consequential effects upon the existing lease value and the premium payable. The Upper Tribunal granted permission to appeal as a review of the FTT’s decision under the written representations procedure. Held: The appeal was allowed. (1) Although the FTT did not err by having regard to an average of the relativities contained in the relevant RICS graphs, they were wrong not to have considered the Gerald Eve and Savills graphs as well, solely because the property was not located in prime central London. The RICS graphs were published in 2009, since when several of them had been updated, including the Gerald Eve and Savills graphs. The fact that a graph was based on data from prime central London did not automatically invalidate its use outside that area. The FTT did not pay proper regard to the more recent cases, outside prime central London, where the Savills enfranchiseable and unenfranchiseable graphs had been preferred to the use of an average of the RICS 2009 graphs. In Trustees of Sloane Stanley Estate v Mundy & Lagesse and Aaron v Wellcome Trust Ltd [2016] UKUT 223 (LC); [2016] EGLR 38, the Tribunal had identified two valuation methods where there was no reliable market transaction concerning the existing lease value with rights: either using the most reliable unenfranchiseable graph or using an enfranchiseable graph and making a deduction for the benefit of the 1993 Act. Had the FTT considered the most reliable (and recent) graphs they would have taken into account the Savills 2015 enfranchiseable graph, the Savills 2016 unenfranchiseable graph and the Gerald Eve 2016 (unenfranchiseable) table and graph. It should have been aware of the Tribunal’s previous decisions adopting the Savills graphs outside prime central London: Trustees of Sloane Stanley Estate v Mundy followed. Xue v Cherry [2015] UKUT 651 (LC), [2015] PLSCS 365, Midlands Freeholds Ltd’s and Speedwell Estates Ltd’s Appeals [2017] UKUT 463 (LC), Sinclair Gardens Investments (Kensington) Ltd’s Appeal [2017] UKUT 494 (LC) and Reiss v Ironhawk [2018] UKUT 311 (LC) considered. The FTT were wrong to exclude the Savills and Gerald Eve graphs from their consideration. On the evidence before the FTT, it should have preferred the appellant’s expert’s approach and adopted his relativity of 74.8% for the reasons he gave in his expert report. That figure was higher than the relativities given in both the Savills 2016 and Gerald Eve 2016 unenfranchiseable graphs (72.8% and 72.5% respectively) and therefore, to a limited extent, reflected the average of the graphs approach favoured by the FTT. Therefore, the Tribunal would determine the relativity at 74.8% rather than remit the issue to the FTT for further consideration and the premium payable was £89,428. Eileen O’Grady, barrister Click here to read a transcript of Trustees of Barry and Peggy High Foundation v Zucconi and another