Relativity is the “value of a dwelling held on an existing lease at any given unexpired term divided by the value of the same dwelling in possession to the freeholder expressed as a percentage” (Leasehold Reform, Graphs of Relativity, RICS October 2009). It is an important component used to ascertain the marriage value for the purpose of calculating the premium to be paid for a new lease under the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act).
In the absence of transaction evidence concerning the sale of comparable properties with similar unexpired terms, graphs of relativity are often used by valuers to determine value.
In Trustees of Barry and Peggy High Foundation v Claudio Zucconi and another [2019] UKUT 242 (LC); [2019] PLSCS 183 an interesting issue arose regarding the use of the Gerald Eve 2016 (Unenfranchiseable) Table and Graph and the Savills 2015 Enfranchiseable and Unenfranchiseable Graphs (the Gerald Eve and Savills graphs), which focus on data from prime central London. The subject property in the appeal was located in North Whetstone, London N20 – outside of prime central London.
The Upper Tribunal (UT) had to determine whether the First-tier Tribunal (FTT) had erred in refusing to consider the Gerald Eve and Savills graphs when calculating the relativity because the subject property was outside prime central London. In its calculations, the FTT adopted an average of five graphs contained in the relativity graphs for Greater London and England published by RICS in 2009.
Relying on Hong 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), the UT held that the FTT failed to have proper regard to recent cases outside of prime central London where the Gerald Eve and Savills graphs had been preferred to the use of the average of the RICS 2009 Graphs. The fact that the subject property was not located in prime central London should not have automatically invalidated the use of the Gerald Eve and Savills graphs.
The UT reaffirmed the valuation guidance provided in Trustees of Sloane Stanley Estate v Mundy & Lagesse and Aaron v Wellcome Trust Ltd [2016] UKUT 223 (LC); [2016] EGLR 38. In short, in the absence of reliable market evidence, the two valuation methods were either the use of the most reliable unenfranchiseable graph or the use of an enfranchiseable graph with deductions made for the benefit of the 1993 Act. Had the FTT considered the most reliable and recent graphs, it would have taken into consideration the Gerald Eve and Savills graphs. The FTT failed to do so and the appeal was allowed.
This decision will be welcomed by valuers.
Elizabeth Dwomoh is a barrister at Lamb Chambers
