Wellcome Trust Ltd v Romines and another

Leasehold enfranchisement — Leasehold Reform, Housing and Urban Development Act 1993 — New lease — Purchase price — Jurisdiction of Lands Tribunal on an appeal — Whether a rehearing — Whether potential for improvement — Determination of purchase price — Costs — Effect of sealed offerIn January 1998 the London Leasehold Valuation Tribunal determined the price payable by the respondent tenants to the appellant landlord for a new lease of a flat, under the Leasehold Reform, Housing and Urban Development Act 1993, in the sum of £94,800. The landlord appealed, contending that the premium payable for a new extended lease should be £132,700. It was asserted on behalf of the tenant that an appeal to the Lands Tribunal could succeed only if it could be shown that the lower tribunal had made an error of law or valuation principle; it was not enough to appeal a valuation judgment, and a procedure was unfair if, as was the position, the landlord was attempting to reargue its case using different witnesses and evidence. If the appeal did involve the rearguing of the issues, the tenants’ valuer spoke to a premium of £94,800. In August 1998, the respondents made a sealed offer to settle in the sum of £105,000. Decision: The appeal was allowed. The premium for the new extended lease should be £108,500. An appeal from the leasehold valuation tribunal was a rehearing and must be determined on the evidence presented to the Lands Tribunal, without regard to the evidence given before the leasehold valuation tribunal. The appellant must prove that the decision of the lower tribunal was wrong. If the Lands Tribunal was satisfied on the evidence before it, that the decision of the lower tribunal was wrong, then it must allow the appeal. Because the right of appeal is unqualified, save for some limited matters, it would clearly never be right, other than in some wholly exceptional circumstances, for the Lands Tribunal to dismiss an appeal despite being satisfied that the decision of the lower tribunal was wrong. The appropriate yield rate should be 6%; matters of fact or opinion by leasehold valuation tribunals or the Lands Tribunal, such as on yield, are inadmissible under Land Securities plc v Westminster City Council [1992] 2 EGLR 15. The value of the flat was £382,000 with a long lease and £273,000 with the short lease. The value of the right to improve the fifth floor of the flat was £36,667. The appellant had achieved more by rejecting the respondents’ sealed offer and proceeding with the appeal. The appellant had succeeded in the appeal, and costs should follow the event. The following cases are referred to in this report. Cadogan Estates Ltd v Hows [1989] 2 EGLR 216; [1989] 48 EG 167; [1991] RVR 132, LT Cadogan Estates Ltd v Shahgholi LRA/26/96 and 57/97; [1999] 1 EGLR 189, LT Daejan Properties Ltd v Weeks [1998] 3 EGLR 125: [1998] 36 EG 146 Gallagher Estates Ltd v Walker (1973) 28 P&CR 113; [1974] EGD 471; 230 EG 359, CA Land Securities plc v Westminster City Council [1993] 1 WLR 286; [1993] 4 All ER 124; [1992] 2 EGLR 15; [1992] 44 EG 153 London & Winchester Properties Ltd’s Appeal, Re (1983) 45 P&CR 429; [1983] 2 EGLR 201; 267 EG 685 Maryland Estates Ltd v 63 Perham Road Ltd [1997] 2 EGLR 198; [1997] 35 EG 94 Maryland Estates Ltd v Abbathure Flat Management Co Ltd [1999] 1 EGLR 100; [1999] 06 EG 177 Oksuzoglu v Kay [1998] 2 All ER 361 Payne (VO) v Ireland (1957) 50 R&IT 379 Sarum Properties Ltd’s application [1999] 2 EGLR 131; [1999] 17 EG 136 Sinclair Gardens Investments (Kensington) Ltd v Franks (1998) 76 P&CR 230; [1998] RVR 261 Sole v Henning (VO) [1959] 1 WLR 769; [1991] 3 All ER 398; (1959) 57 LGR 249; 52 R&IT 541, CA Speedwell Estates Ltd, Re [1999] 2 EGLR 121; [1999] 27 EG 128 Swann v White (1996) 71 P&CR 210; [1996] 1 EGLR 199; [1996] 26 EG 136, LT Tramountana Armadora SA v Atlantic Shipping Co SA [1978] 2 All ER 870; [1978] 1 Lloyds Rep 238 Trustees of the Eyre Estate v Jaskel LRA/48/97 Trustees of the Eyre Estate v Saphir [1999] 2 EGLR 123; [1999] 34 EG 71 Verkan & Co Ltd v Byland Close (Winchmore Hill) Ltd [1998] 2 EGLR 139; [1998] 28 EG 118 Kenneth Munro (instructed by Cameron McKenna) appeared for the landlord; David Elvin (instructed by Dewar Hogan) represented the tenants. Giving the decision of the tribunal, Mr Peter H Clarke FRICS said: This is an appeal by the landlord of a long leasehold flat in Kensington against the decision of a leasehold valuation tribunal fixing the premium on the grant of a new lease under the Leasehold Reform, Housing and Urban Development Act 1993 at £94,800. Mr Kenneth Munro, of counsel, appeared for the appellant landlord and called Mr MJW Duncan and Mr JEC Briant BA ARICS. Mr David Elvin, of counsel, appeared for the respondent tenants and called Mr RD Sharp BSc FRICS. Facts The flat that is the subject of this appeal forms part of 2 Ennismore Gardens, Kensington London SW7, situated between Hyde Park and Brompton Road, close to the Royal Albert Hall, the South Kensington Museums and Brompton Oratory. Ennismore Gardens is in the Knightsbridge Conservation Area and the buildings are listed as of special architectural or historic interest, Grade II. Ennismore Gardens was built between 1848 and 1855, originally as ornate Portland Stone or stucco town houses for people of means, around or close to an attractive garden square. The houses have now been converted into flats and maisonettes. Ennismore Gardens is a mid-terrace house situated on the north side of the square, backing on to the gardens. It has been converted into self-contained flats and maisonettes. There is no lift. Flat F (the subject flat) is on the fourth and fifth floors. It now comprises: hall, three bedrooms, study, kitchen, bathroom, WC and boiler room on the fourth floor and 230a large reception room on the fifth floor, with a roof terrace with a view over the gardens. Following the grant of a licence on 10 November 1961, works were carried out to the subject flat, including construction of the reception room on the fifth floor. The freehold of 2 Ennismore Gardens is held by the appellant. By an underlease dated 5 December 1960, the subject flat, comprising fourth and part-fifth floors of 2 Ennismore Gardens, was let for 66 years and 45 days (less the last 10 days) from 11 November 1960 to 25 December 2026 at a rent of £125 pa, plus 22% of the landlord’s outgoings. This underlease had approximately 29.25 years to run at the date of valuation, 18 September 1997. The tenants are now Joel Clay Romines and Patricia Bowe Romines. By a notice dated 7 May 1996 under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act), the tenants claimed the right to acquire a new lease of the subject flat. The premium could not be agreed and application was made by the tenants to a leasehold valuation tribunal of the London Rent Assessment Panel to determine the premium. Following a hearing on 18 September 1997, the tribunal issued a decision, dated 28 January 1998, fixing the premium at £94,800. On 24 February 1998, the landlord appealed against that decision to this tribunal. The agreed valuation date for the purposes of this appeal is 18 September 1997. Issues There are two issues in this appeal: the nature and extent of the jurisdiction of the Lands Tribunal on appeal from a decision of a leasehold valuation tribunal; and the amount of the premium, under the 1993 Act, payable on the grant of a new lease of the subject flat. Jurisdiction of Lands Tribunal Submissions Mr Munro, for the appellant, said that he accepted the position as stated by this tribunal in Trustees of the Eyre Estate v Saphir [1999] 34 EG 71* and Trustees of the Eyre Estate v Jaskel LRA/48/97, namely that if the tribunal is satisfied on the evidence before it that the decision of the leasehold valuation tribunal is wrong, then it must allow the appeal. There is no fetter on the right of appeal and no fetter on the tribunal’s jurisdiction. Mr Munro referred to Swann v White [1996] 1 EGLR 199†, Verkan & Co Ltd v Byland Close (Winchmore Hill) Ltd [1998] 2 EGLR 139‡, Sinclair Gardens Investments (Kensington) Ltd v Franks [1998] RVR 261, Daejan Properties Ltd v Weeks [1998] 3 EGLR 125§, Maryland Estates Ltd v 63 Perham Road Ltd [1997] 2 EGLR 198¶; and Maryland Estates Ltd v Abbathure Flat Management Co Ltd [1999] 06 EG 177¥. * Editor’s note: Also reported at [1999] 2 EGLR 123 † Editor’s note: Also reported at [1996] 26 EG 136 ‡ Editor’s note: Also reported at [1998] 28 EG 118 § Editor’s note: Also reported at [1998] 36 E6 146 ¶ Editor’s note: Also reported at [1997] 35 EG 94 ¥ Editor’s note: Also reported at [1999] 1 EGLR 100 Mr Elvin, for the respondents, referred to the right of appeal contained in para 2 of Schedule 22 to the Housing Act 1980. In Verkan the former president (Judge Marder QC) said that this tribunal should be slow to disturb the decision of the leasehold valuation tribunal, at least where there is no dispute as to matters of law or valuation principle, unless satisfied that the decision is clearly wrong. This restriction on the right of appeal gives effect to the intention of parliament. This statement of principle was applied in Daejan and Abbathure and, in a more limited sense, in Saphir and Jaskel. He submitted that there are no issues of law or valuation principle in this appeal. There is no reason why an appeal to this tribunal should be by way of a rehearing. On grounds of fairness and public policy, the principle set out in Verkan should apply. The appellant must show that the decision of the leasehold valuation tribunal contains an error of law or valuation principle. A serious error of valuation could be an error of valuation principle. In this appeal, however, the issues between the parties are solely matters of valuation judgment and do not fall within the Verkan principle. In this appeal, the unfairness of the procedure advocated by the appellant can be seen. It is an attempt by the landlord to reargue its valuation case using different witnesses and new evidence. The respondent tenants are willing to accept the decision of the leasehold valuation tribunal unless it is determined by this tribunal that the appeal is a new hearing. Decision I look, first, at the statutory provisions relating to appeals. When leasehold enfranchisement was first introduced, disputes regarding price and certain other matters were determined at first instance by the Lands Tribunal: section 21(1) of the Leasehold Reform Act 1967 as originally enacted. In 1981 the jurisdiction formerly exercised by this tribunal was transferred to leasehold valuation tribunals, and the Lands Tribunal became an appellate tribunal: section 142 and Part I of Schedule 22 to the Housing Act 1980 (the 1980 Act). Para 2 of Schedule 22 to the 1980 Act provides: No appeal shall lie from a decision of a leasehold valuation tribunal to the High Court… and no case may be stated for the opinion of the High Court in respect of such a decision, but any person who — (a) appeared before a tribunal in proceedings to which he was a party; and (b) is dissatisfied with its decision, may within such time as rules under section 3(6) of the Lands Tribunal Act 1949 may specify, appeal to the Lands Tribunal. These provisions apply to this appeal: section 91(10) of the 1993 Act. The only fetters on the right of appeal are that the appellant must have “appeared” before the leasehold valuation tribunal in proceedings to which he was a party, and the appeal must be made within 28 days: r 6(1)(a) of the Lands Tribunal Rules 1996, as substituted by r 5 of the Lands Tribunal (Amendment) Rules 1997. Appeals are not limited as to subject-matter, but an appeal can only be made against a final decision of the leasehold valuation tribunal. This tribunal has no jurisdiction over interlocutory decisions and procedural matters in the lower tribunal: see Sarum Properties Ltd’s application [1999] 17 EG 136* and Re Speedwell Estates Ltd [1999] 27 EG 128†. There is no fetter on the jurisdiction of the Lands Tribunal on appeal. Para 2 does not contain any guidance as to the procedure to be followed on appeal — whether it is to be by way of a review of the lower tribunal’s decision or a rehearing. Thus, the statutory provisions leave open two questions. First, whether there is any limitation on the jurisdiction of this tribunal when deciding an appeal, and, second, whether the procedure on appeal is to take the form of a review of the lower tribunal’s decision or a rehearing. Both questions had been before this tribunal on several occasions. I now consider these decisions. * Editor’s note: Also reported at [1999] 2 EGLR 131 † Editor s note: Also reported at [1999] 2 EGLR 121 In Re London & Winchester Properties Ltd’s Appeal (1983) 45 P&CR 429*, the form of hearing was considered. After referring to the appeal provisions in para 2 of Schedule 22 to the 1980 Act, which the member (Mr VG Wellings QC, later president) called “these inept provisions”, he said at pp430-431: No indication is given in these provisions as to whether the hearing in the Lands Tribunal is to be a re-hearing. However the form (Form 3A) of Notice of Appeal required by rule 12 (as amended) of the Lands Tribunal Rules 1975 to be sent by an appellant to the registrar, requires the appellant to state, inter alia, whether he does or does not propose to call an expert witness to give evidence in support of the valuations on which he will rely at the hearing of the appeal. Rule 13 (as amended) requires other parties to the appeal to serve a notice in writing stating, inter alia, whether they do or do not propose to call an expert witness to give evidence. Appeals from leasehold valuation tribunals are not limited to appeals on points of law and where the questions in issue are questions of fact or valuation the only practicable course would seem to for there to be a re-hearing with evidence. I assume that that is what the amending provisions intend: alternatively that the procedure at the hearing of the appeal is to be within the discretion of the Lands Tribunal. * Editor’s note: Also reported at [1983] 2 EGLR 201; (1983) 267 EG 685 231The forms of appeal and response used in this current appeal, although not now prescribed, both refer to the intention to call an expert witness. Later in his decision, the member said at p433: It is axiomatic that an appeal to the Lands Tribunal, which takes the form of a re-hearing, must be determined on the evidence presented to the Lands Tribunal, without regard to the evidence given before the leasehold valuation tribunal. The form of hearing was referred to in Swann v White in the context of submissions by the appellant landlord that, because the appeal is a rehearing and his expert evidence was unchallenged, the tribunal must accept it and allow the appeal. In the absence of evidence from the tenants, the decision of the leasehold valuation tribunal was unsupported at the rehearing and must be set aside. This was a hearing before me and I rejected these submissions. After referring to Re London & Winchester, and the member’s observation that an appeal takes the form of a rehearing and must be determined on the evidence presented to this tribunal, I said at p200G: It is true that in appeals from a leasehold valuation tribunal there is no provision similar to rule 54(2)(i) of the Lands Tribunal Rules 1975 in rating appeals, which requires the appellant to show that the decision of the local valuation tribunal was wrong. This must however be implied. The decision of the leasehold valuation tribunal stands until it is shown to be wrong. I think that a respondent is entitled to say to the appellant: “I accept the decision; you prove that it is wrong”. This may be a risky course of action to take but I do not think that the respondent automatically loses the appeal by calling no evidence. Furthermore, the Lands Tribunal is an expert tribunal and it is perfectly proper for a member to use his expertise to evaluate the expert evidence put before him. This may cause him to reject it even though alternative evidence has not been given. The position as set out in Re Winchester and Swann was adopted by the tribunal (Dr T Hoyes FRICS) in Maryland Estates Ltd v 63 Perham Road Ltd. The decision in Swann was considered by Judge Rich QC (sitting as a member of the Lands Tribunal) in Sinclair Gardens Investments (Kensington) v Franks. He said: For myself, I am hesitant to rely on any expertise of my own, but I would treat new evidence brought before the Lands Tribunal for the first time with, if not particular scepticism, at least with particular care, for I would not wish to encourage Lessors to think that they can reserve the evidence which should have been offered to the leasehold valuation tribunal, when the parties appeared on equal terms, to the appeal before the Lands Tribunal, where the nominee purchaser may have exhausted his funds and is on risk as to costs. I agree with Mr PH Clarke that unless I am satisfied by the freeholder company’s evidence that the leasehold valuation tribunal was wrong, I should allow the decision to stand, rather than interfering with it because another valuation might equally be said not to be wrong. To this extent, I do think that it is proper for me to have regard, if not to the evidence before the LVT, except in so far as the parties otherwise agree, at any rate to their decision. I look now at the decision of the former president, Judge Marder QC, in Verkan & Co Ltd v Byland Close (Winchmore Hill) Ltd. He considered the form of hearing and the jurisdiction of the tribunal and said at p144F: In practical terms, this case is a rerun of the cases presented before the leasehold valuation tribunal, with the same witnesses giving virtually the same evidence. Historically, the Lands Tribunal has not acted as a court of review, but has treated each appeal as a hearing de novo, with the parties entitled to call fresh evidence if so advised. This tribunal in determining an appeal has not hitherto been concerned to consider whether the decision appealed against was right or wrong, save perhaps in relation to the cost of the appeal proceedings. However, I am not aware of any statutory provision which binds the tribunal to conduct the appeal in this way, or indeed in any particular way. The relevant statutory provision, which emerges obscurely from para 2 of Schedule 22 to the Housing Act 1980, as applied by section 91(10) of the 1993 Act, merely creates a right of appeal from the decision of the leasehold valuation tribunal to this tribunal. In my judgment, where, as in this case, a competent leasehold valuation tribunal (which is assumed to have local market knowledge) has decided matters of fact and value on the opinion evidence of valuers and an inspection of the subject premises, then on a subsequent appeal to the Lands Tribunal, at least where there is no suggestion of any dispute as to matters of law or of valuation principle, the Lands Tribunal should be slow to disturb the decision of the leasehold valuation tribunal unless satisfied that the decision is clearly wrong. This is consistent with the views expressed by Judge Rich QC (sitting as a member of the Lands Tribunal) in the case of Sinclair Gardens Investments (Kensington) Ltd v Franks LRA/19/96. Judge Marder then referred to Swann, Winchester and Sinclair Gardens and concluded at p144J: I draw attention to the anomalous situation which has arisen, whereby leave to appeal is now required for appeals arising under the 1996 Act (in relation to service charges etc) although an appeal as of right remains in cases of the price of enfranchisement or extended leases under the Acts of 1967 and 1993. Consideration should be given to imposing a requirement of leave to appeal in all cases from the leasehold valuation tribunal. Mr Elvin relied upon these observations to support his submission that the issues in this appeal are solely matters of valuation judgment; they do not fall within Verkan, and therefore I should be slow to disturb the decision of the leasehold valuation tribunal in the absence of matters of law or valuation principle. I find it difficult to accept that Judge Marder’s statement is as wide as Mr Elvin suggests. I do not understand the former president to have said that the tribunal should only allow an appeal where it can be shown that the decision of the leasehold valuation tribunal contained an error of law or valuation principle or, at most, a substantial error in valuation fact or opinion. In my view, the meaning of the decision of Judge Marder set out above, read as a whole, is that the onus is on the appellant to prove that the decision of the leasehold valuation tribunal is clearly wrong. His observations referred to the burden of proof and were not intended to place any restriction on the jurisdiction of the tribunal. He was, I think, making the point that it is likely to be easier to show that the lower tribunal had made an error of law or valuation principle than to prove an error of valuation fact or opinion, such as the yield to be used or the value of a particular interest, where the yield or value may fall within a band or one figure may equally appear to be as correct as another figure (as commented by Judge Rich in Sinclair Gardens). Shortly after Verkan, Judge Marder referred again to these matters in Daejan Properties Ltd v Weeks and Cadogan Estates Ltd v Shahgholi LRA/26/96 & 57/97*. In the former case he said at p128E: In my opinion, this appeal again demonstrates the desirability of considering a limit to the rights of appeal from the decision of a leasehold valuation tribunal to this tribunal, an issue to which I recently drew attention in the case of Verkan & Co Ltd v Byland Close (Winchmore Hill) Ltd… No real point of law or of valuation principle arose; the appellant in this case simply took advantage of the appeal procedure to have “a second bite of the cherry”. As has been said before, in such circumstances the Lands Tribunal should be slow to disturb the decision of a local tribunal unless convinced that it is clearly wrong, The LVT in the present case gave a reasoned decision entirely based on the evidence of fact and valuation opinion which had been called. I see no reason to differ from that decision on consideration of essentially the same material. * Editor’s note: Reported at [1999] 1 EGLR 189 In Shahgholi he said at p20: As I commented in the Verkan case, there is no statutory requirement that an appeal to the Lands Tribunal be conducted in any particular way, and for my part I do not resile from the views I expressed in that decision as to the principles on which the Lands Tribunal should approach an appeal from the Leasehold Valuation Tribunal. However, the point may be regarded as academic in the present case, for I am satisfied that it has been clearly demonstrated that the Leasehold Valuation Tribunal was wrong, and the conclusion and valuation was against the weight of market evidence presented at the hearing. In my view, Judge Marder was, again, essentially referring to the burden of proof in those cases. In Daejan he accepted the respondent’s case and rejected the evidence of the appellants’ expert. The appellants 232 thus failed to discharge the burden of proof. Conversely, in Shahgholi Judge Marder allowed the appeal, although the issues were all matters of valuation. He preferred the expert evidence of the appellant. The former president found the decision of the leasehold valuation tribunal to be wrong, but I cannot find in the decision any matters of law or valuation principle. Judge Marder found the decision to be wrong on matters of valuation fact and opinion, ie the values of the parties’ interests, the deduction for the tenant’s right to a statutory tenancy under the Landlord and Tenant Act 1954 and the landlord’s share of marriage value. In Maryland Estates Ltd v Abbathure Flat Management Co Ltd the tribunal (Mr A Dinkin QC and Mr PH Clarke FRICS) arrived at a price for the collective enfranchisement of a block of flats that was only marginally higher than the price determined by the leasehold valuation tribunal. Nevertheless, the tribunal allowed the appeal. They said at p183: We have reached a decision that is only slightly at variance with that found by the valuation tribunal. In such situations this tribunal may well be slow to interfere with that decision in accordance with the approach to appeals set out by the president in Verkan & Co Ltd v Byland Close (Winchmore Hill) Ltd [1998] 2 EGLR 139. Submissions were made to us on this aspect but we do not understand counsel to disagree with the president’s conclusions. However, the valuation tribunal’s decision in the present case was given before the Perham Road case was decided, and points of law have been argued before us that were not taken before the valuation tribunal. Furthermore, certain discrepancies have been drawn to our attention relating to some of the figures used by the valuation tribunal and it is not entirely clear how their final decision as to the actual price to he paid was arrived at. In these circumstances, we have decided, as is apparent from our decision, to determine these appeals on the submissions and evidence put before us. I refer now to two decisions relied upon by Mr Munro to support his submission that this tribunal should allow an appeal where it is satisfied on the evidence that the decision of the lower tribunal is wrong, with no fetter on the right of appeal or jurisdiction. In Trustees of the Eyre Estate v Saphir the member (Mr NJ Rose FRICS) referred to Verkan and other decisions, and then said at pp71-72: The right of appeal to the Lands Tribunal, which is given to a person who is “dissatisfied” with the decision of a leasehold valuation tribunal by para 2 of Schedule 22 to the Housing Act 1980, as applied by section 91(10) of the Leasehold Reform, Housing and Urban Development Act 1993, is unqualified in its terms. In my judgment, it gives rise to an appeal by way of rehearing. In my view, the basic duty of the tribunal on such appeal can be stated simply. If the tribunal is satisfied on such evidence as may be before it that the decision of the LVT was wrong, it must allow the appeal; otherwise it must dismiss the appeal. In expressing himself in the way he did in Verkan, the then president could not have been intending, in my opinion, to be suggesting that this was not the duty of the tribunal. Because the right of appeal that is given is unqualified, it would clearly never be right, other than perhaps in some wholly exceptional circumstances, for the tribunal to dismiss an appeal despite being satisfied that the decision of the LVT was wrong. I therefore propose to approach my decision in the present case by asking myself: does the evidence before me satisfy me that the decision of the LVT was wrong? I would only add that since this is not a review but a rehearing, with evidence called on both sides, I am not concerned to see whether the LVT was right, on the evidence that it had before it, to decide as it did. This would add a very time-consuming dimension to the case and one that is unnecessary. This statement was referred to with approval a few months later by Mr M St J Hopper FRICS in Eyre Estates v Jaskel. He then said at p27: I therefore approach the appeal on the valuation issue on the basis that it is for me to determine, upon the evidence before me, whether the appellants can discharge the onus of proof, which is upon them, to show that the LVT decision was wrong. I also agree that the above extract from the decision in Saphir is a correct statement of the law and practice relating to appeals from a leasehold valuation tribunal to this tribunal. I think it may be helpful to look at the position in rating where there is a similar right of appeal to this tribunal. In Sole v Henning (VO) [1959] 3 All ER 398, the ratepayer appealed against the decision of a local valuation court concerning the assessment of his house. This tribunal (Mr JAF Watson FRICS) dismissed the appeal because the appellant ratepayer, who produced no evidence of value, had “failed to provide me with any grounds for interfering with the decision of the local valuation court”. The ratepayer appealed to the Court of Appeal. Lord Evershed MR, after referring to the reasons for the tribunal’s decision, said at p399H: [The appellant] accepts, as he must, that the Court of Appeal has no jurisdiction save in matters of law, but he says that this was a wrong approach, a misdirection of itself by the tribunal, and therefore an error in law. Further, he says, that the matter should have been treated as res integra, and it is not right to say that the tribunal performs its function by accepting the decision of the local valuation court, unless the appellant, in this case the ratepayer, has affirmatively satisfied the tribunal that the court was wrong. I think that way of putting it may he giving undue emphasis to the phrase, “the burden is on the ratepayer”; but none the less my view is that the tribunal in matters of this kind is entitled to say, and properly performs its function if it does say, “I am not going to overturn the decision of the court below unless I am satisfied by him who complains of it that there is something wrong as a matter of fact in that court’s findings”. It is quite true that before the tribunal there is a re-hearing of the evidence, but I do not think that there is anything in the paragraph quoted which disqualifies the conclusion based on it, and which, as a consequence, lets in, so to speak, the discussions about the method of’ valuation which the ratepayer has also intimated to us in his observations. In my view, three points arise out of this extract from the judgment of the Master of the Rolls. First, that proceedings before the Lands Tribunal involve a rehearing of the evidence. Second, that the onus is on the appellant to satisfy the tribunal that a decision of the lower tribunal is wrong. Third, what must be proved is “something wrong as a matter of fact” in the lower tribunal’s findings. There is no restriction to errors of law or valuation principle. The emphasis is on the burden of proof. Later in his decision, Lord Evershed MR referred to r 45(4) of the Lands Tribunal Rules 1956, which required the tribunal to “give effect to the contention of the appellant in so far as that contention appears to the tribunal to be well-founded”. I observed in Swann v White that this burden of proof must be implied in an appeal from a decision in a leasehold valuation tribunal. I do not think that it is disputed in this current appeal that the burden of proof is on the appellant landlord. Finally, I refer to an early decision of this tribunal, given by the first president, Sir William Fitzgerald QC, in Payne (VO) v Ireland (1957) 50 R&IT 379. This concerned assessments of gross value £27 and £65 determined by a local valuation court. The former president said at p380: I always bear in mind that members of the local valuation court have special knowledge of local conditions prevailing in the district and, where it is a question of a few pounds one way or another in estimating the hypothetical rent, I would feel reluctant to interfere with their decision unless I was satisfied that they had made a mistake in law, or that their decision was against the weight of evidence, or that they applied a wrong principle in valuation. This language is similar to that used by Judge Marder in Verkan, but, in my judgment, the statement in Payne must be read in the context of an appeal involving low assessments: “a question of a few pounds one way or another in estimating the hypothetical rent”. That was not the position in Verkan and is not the position in this current appeal, where the appellant seeks a premium of £132,700 and the respondents defend the decision of the leasehold valuation tribunal at £94,800. In my judgment, the cases considered above establish the following principles regarding the right of appeal to this tribunal given by para 2 of Schedule 22 to the 1980 Act: 1. There is no restriction on the right of appeal to this tribunal from a decision of a leasehold valuation tribunal, save that the appellant must have appeared before the lower tribunal in proceedings to which he was a party and the appeal must be made within 28 days of the date of the disputed decision: para 2 of Schedule 22 to the 1980 Act and r 6(1)(a) of the Lands Tribunal Rules 1996 as substituted by r 5 of the Lands Tribunal (Amendment) Rules 1997. The decision must be a final 233 decision of the leasehold valuation tribunal: this tribunal has no jurisdiction over interlocutory decisions and procedural matters in the lower tribunal: see Sarum Properties and Re Speedwell. 2. The proceedings before the Lands Tribunal on appeal take the form of a rehearing and must be determined on the evidence presented to the tribunal, without regard to the evidence given before the leasehold valuation tribunal: see Sole at p399H, Re London & Winchester at p433, Sinclair Gardens at p5, Saphir at pp71-72 and Jaskel at pp26-27. New evidence brought before the Lands Tribunal for the first time will be treated “with if not particular scepticism, at least with particular care”: see Sinclair Gardens at p5 and Verkan at p144H. 3. The appellant must prove that the decision of the leasehold valuation tribunal is wrong. This decision stands until it is shown to be wrong by the evidence produced at the rehearing before the Lands Tribunal: see Sole at p399H, Swann at p200G, Sinclair Gardens at p5, Verkan at p144G, Saphir at p71 and Jaskel at pp26-27. 4. If this tribunal is satisfied on the evidence before it that the decision of the leasehold valuation tribunal is wrong, then it must allow the appeal; otherwise, it must dismiss the appeal. Because the right of appeal is unqualified, save as to the identity of the appellant and compliance with the time-limit, it would clearly never be right, other than in some wholly exceptional circumstances, for this tribunal to dismiss an appeal despite being satisfied that the decision of the leasehold valuation tribunal is wrong: see Saphir at p72 and Jaskel at pp26-27. 5. The jurisdiction of the Lands Tribunal on appeal is not limited to matters of law or valuation principle. It has a duty to allow an appeal where the decision of the leasehold valuation tribunal is shown to be wrong, whether the error in the lower tribunal’s decision is one of law or valuation principle or any other substantive matter, including matters of fact or value: see Sole at p399H, Saphir at pp71-72 and Jaskel at pp26-27. It follows from the above that I reject Mr Elvin’s submissions and accept those of Mr Munro, namely that if I am satisfied on the evidence before me that the decision of the leasehold valuation tribunal is wrong, then I must allow the appeal. My jurisdiction is not limited to matters of law or valuation principle. The question I must answer is whether the appellant has proved, on the evidence before me, that the decision of the leasehold valuation tribunal fixing the premium of £94,800 is wrong. Premium Evidence Appellant Mr Michael Duncan is a senior partner at WA Ellis, estate agents and surveyors of Brompton Road, London SW3. He gave evidence of the values of the current lease, the new lease and the freehold of the subject flat. Mr Duncan referred to the provision of the fifth floor to the flat pursuant to the licence granted in 1961. He acknowledged that this is an improvement but should be disregarded in part only. The value of the “site” of the fifth floor can be taken into account, and he valued this, using the standing-house approach, at 50% of the value of the added accommodation. This takes into consideration the long leasehold interest held by the respondents. Mr Duncan referred to comparables to support his valuations. He adjusted them to relate them to the interest being valued by reference to indices showing the relationship between unexpired lease terms and the freehold and between capital values at different dates respectively. These indices provide the most reliable method for relating the comparable evidence to the subject flat at the valuation date. He also referred to a schedule of settlements under the Leasehold Reform Act 1967 on the Grosvenor, Belgrave and Cadogan Estates showing the relationship between leasehold and freehold values. Mr Duncan said that the value of the current lease at the valuation date, with vacant possession and disregarding improvements and the claim for a new lease, was £260,000. He arrived at this figure by the following route: (i) The value disregarding the fifth floor was £220,000, supported by two comparables in Ennismore Gardens. (ii) The value of the fourth and fifth floors (as improved) was £300,000. (iii) The increase in value due to the improved fifth floor was therefore £80,000. (iv) 50% of this additional value (£40,000) represents the “site” value of the fifth floor, to be added to the value of the fourth floor, £220,000, to produce a current lease value of £260,000. Mr Duncan assessed the value of the new lease of the subject flat at £442,500. He arrived at this figure as follows: (i) The value disregarding the fifth floor was £385,000, supported by the sale prices of long leasehold or freehold flats in Ennismore Gardens, Rutland Gate, Egerton Gardens and West Halkin Street. He adjusted them by reference to the indices referred to above to show the freehold value of the subject flat in September 1997. (ii) The value of the existing lease of the fourth and fifth floors (as improved) was £500,000, representing the value of the fourth floor above (£385,000) with a notional increment for the benefit of the roof terrace and an abatement for a further staircase. (iii) 50% of the additional value (50% of £115,000, £57,500) represents the “site” value of the fifth floor, to be added to the value of the fourth floor, £385,000, to produce a new lease value of £442,500. Mr Duncan said that there is a difference between the long leasehold and freehold values of a flat. The latter is higher. In Shahgholi Judge Marder QC found a 3% difference between the freehold and long leasehold values of a maisonette in Cadogan Place, London SW1. In this appeal, Mr Duncan put the uplift at less than 3% but not less than 2%. Mr Julian Briant is a partner at Cluttons, Daniel Smith, chartered surveyors, with offices in Pelham Street, Kensington, London SW7, and elsewhere. Mr Briant has been responsible for enfranchisement on the appellant’s Ennismore Gardens Estate since October 1998. He also acts for Eyre Estate, John Lyon’s Charity Estate and other estates. Mr Briant assessed the premium for the grant of the new lease of the subject at £132,700, using values provided by Mr Duncan, as follows: Existing term and reversion               Ground rent £125 pa     Years’ purchase 29.25 years @ 6% 13.6345   £1,704 90-year lease, net of tenant’s improvements £442,500     Add 2% for freehold 8,850       451,350             PV 29.25 years @ 6% 0.181945   £82,120       £83,824 Proposed term and reversion               Freehold value 451,350     PV 119 years @ 6% 0.002   £903 Diminution in value of reversion     £82,921         Marriage value               Value after marriage       Landlord £903     Tenant £442,500 £443,403           Value before marriage       Landlord £83,824     Tenant £260,000 £343,824   Gain on marriage   £99,579           50% to freeholder     £49,759       £132,710         Premium for lease extension     say £132,700   Mr Briant said that the yield used in his valuations comprises a number of factors, including location, quality, tenant’s covenant strength and unexpired term. Mr Briant has used 6%. The yield for flats 234 should not be higher than for houses. An investment market for flats exists, although it is not so finely developed as that for houses. In support of 6%, Mr Briant referred to three settlements and a transaction in Ennismore Gardens for lease extensions, all settled at 6%, and to a lengthy schedule of analysed enfranchisement prices under the Leasehold Reform Act 1967 on the Grosvenor, Belgravia and Cadogan Estates. He also referred to settlements on the South Kensington Estate. Mr Briant referred to a decision of the leasehold valuation tribunal on the collective enfranchisement of 10 Ennismore Gardens, where the differentials between long and short leases with 28 years unexpired were agreed or determined at between 48% and 61%, with an average for the building of 60%. Respondents Mr Robin Sharp BSc FRICS is in practice on his own account in Croydon. He was formally the director of valuation with Keith Cardale Groves. Mr Sharp assessed the premium for the grant of a new lease of the subject flat at £94,800, the premium determined by the leasehold valuation tribunal, calculated as follows: Existing term and reversion       Ground rent £125     Years’ purchase 29.25 years @7% 12.31   £1,539         Unimproved £420,000     PV 29.25 years @ 7% 0.1382639   £58,071         Diminution in value of reversion     £59,610         Marriage value       Value after marriage       Landlord nil     Tenant £420,000 £420,000           Value before marriage       Landlord £59,610     Tenant £290,000 £349,610   Gain on marriage   £70,390   50% to freeholder     £35,195       £94,805 Premium for lease extension     say £94,800   Mr Sharp valued the existing lease at £290,000 by reference to three comparables in Ennismore Gardens. This figure includes hope value for the fifth floor. This additional value is limited “to the extent that the expectation of realising… would be reflected in offers made in the open market by prospective purchasers” (RICS Red Book PS 4.2.5). This additional value cannot be more than 10%. He criticised a site value of 50% for the fifth floor, having regard to the difficulty of construction work on this floor. He said that builders usually ascribe one-third of sale value to site value and only exceed this ratio in selected circumstances. Mr Sharp values the new lease of the subject flat at £420,000, including hope value for the fifth floor. He supports this figure by reference to three freehold or long leasehold flat sales in Ennismore Gardens and one in Egerton Gardens. Mr Sharp adopts a yield of 7%, supported by leasehold valuation tribunal decisions and a base rate of 7% in September 1997. A yield as low as 6% would be expected of shops in Oxford Street. A fixed rent for 29.25 years would be unattractive to investors. Settlements are not the best evidence for various reasons, including the Delaforce effect. Mr Sharp said that nothing turns on the 2% differential adopted by the appellant’s valuers for the freehold value because comparison of freehold flats plus those on long leases are provided and used in the valuation. The use of indices to show the relationship between leases of different lengths and values at different times does not override market evidence. There is a difference between the values of leases of different lengths, but this is not a preordained percentage. Decision I have inspected the subject flat and most of the comparables. The effect of enfranchisement by the tenant of a flat under the 1993 Act is that he obtains a new lease for a term equivalent to the unexpired term of the existing lease plus 90 years at a peppercorn rent. The landlord obtains a premium for the grant of this new lease calculated in accordance with Schedule 13 to the Act. This premium is the aggregate of: (a) the diminution in value of the landlord’s interest in the tenant’s flat; (b) the landlord’s share of the marriage value; (c) any compensation payable to the landlord for losses suffered in respect of other properties. In this appeal, no claim is made in respect of item (c). Landlord’s interest The first element in the premium, the diminution in the value of the landlord’s interest, is the difference between the value of the landlord’s interest in the tenant’s flat: (a) prior to the grant of the new lease; and (b) once the new lease is granted. In both cases, the value is the amount that the interest ought be expected to realise on the valuation date if sold on the open market by a willing seller, excluding the tenant’s and any intermediate leaseholder’s bid, and on certain other assumptions, including the assumption that any increase in value attributable to tenant’s improvements is to be disregarded. Yield — Mr Briant capitalises the existing rent and defers the landlord’s reversionary interest at 6%. He supports this figure with evidence of analysed settlements and transactions in Ennismore Gardens and on nearby estates. Mr Sharp supports his yield of 7% by reference to the bank base rate in September 1997 (7%) and numerous decisions by leasehold valuation tribunals in London and elsewhere. I prefer Mr Briant’s figure of 6%, due to the greater weight that I can give to his supporting evidence. Although settlements are lower in the scale of comparable evidence than open market transactions, I place them higher than the indirect evidence of bank rate and leasehold valuation tribunal decisions. Bank rate has an effect on yield, but it is essentially secondary or indirect evidence. As Lord Denning MR observed in Gallagher Estates Ltd v Walker (1973) 28 P&CR 113 at p117: I doubt whether the money market is a safe guide in making valuations of land. The important market is the land market in the vicinity. Sir Eric Sachs, in the same case, said at p121: I would respectfully endorse the observations of Lord Denning MR… when he said that one must look primarily to the land market, and to the money market only as a factor. Land market evidence is better evidence because comparison is easier and the underlying financial factors (eg bank rate) would have been considered and assimilated into the transactions and settlements that form that market. Leasehold valuation tribunal decisions on questions of fact or opinion are indirect or secondary evidence and can be given little or no weight in proceedings in this tribunal, even if they are admissible. In Land Securities plc v Westminster City Council [1992] 44 EG 153* the issue was whether an arbitrator ‘s award determining the market rent of an office building on review is admissible evidence in another rent review relating to adjoining offices. Hoffmann J, after referring to the admissibility of evidence of rents in the market and on review, said at p155: An arbitration award on the other hand is an arbitrator’s opinion, after hearing the evidence before him of the rent at which the premises could reasonably have been let. The letting is hypothetical, not real. It is therefore not direct evidence of what was happening in the market. It is the arbitrator’s opinion of what would have happened. In principle the judgement, verdict or award of another tribunal is not admissible evidence to prove a fact in issue or a fact relevant to the issue in other proceedings between different parties. The leading authority for that proposition is Hollington v F Hewthorn & Co Ltd… *Editor’s note: Also reported at [1992] 2 EGLR 15 He concluded that the award was inadmissible, and said at p158: 235This is not in my view a technical decision on outdated rules of evidence. Properly analysed I think that the arbitrator’s award has in itself insufficient weight to justify the exploration of otherwise irrelevant issues which its inadmissibility would require. In my view, the same principles apply to decisions on matters of fact or opinion by leasehold valuation tribunals and this tribunal: see eg Cadogan Estates Ltd v Hows [1989] 2 EGLR 216*, where earlier decisions of leasehold valuation tribunals and this tribunal on yield were rejected in favour of settlement evidence. *Editor’s note: Also reported at [1989] 48 EG 167 Mr Elvin, in his closing submissions, and Mr Sharp, in his evidence, criticised settlement evidence, particularly with regard to the Delaforce effect, ie that the yields are low and the values high because there is anxiety to settle by tenants. The Delaforce effect is reduced or eliminated where the tenants are professionally represented by surveyors in their negotiations with the landlords and where there are other factors removing or balancing the tenants’ wish to settle without litigation. It is clear from the settlement evidence put forward by Mr Briant that nearly all the tenants were represented by well known firms of surveyors, and, for the reasons given by this tribunal in Hows, the Delaforce effect on Central London estates, including the Grosvenor, Belgravia and Cadogan estates referred to by Mr Briant, is also eliminated by other factors. In Hows, the tribunal (Mr WH Rees and Dr T Hoyes) said at p218M: On the issue of the “Delaforce” effect, we prefer the evidence of Mr Strathon and his opinion that in an area of high property values such as prime central London locations, where the majority of lessees are professionally represented in negotiations by surveyors, it has a minimal impact upon the prices agreed. As was accepted in Lloyd-Jones and restated by Mr Strathon in evidence before us, the issue is not a one-way matter. On large estates such as the Grosvenor and Cadogan, where there is a continuing string of applications from lessees to enfranchise, there is also a continuing desire by the freeholder, equal to that by lessees, to avoid references to this tribunal and to leasehold valuation tribunals. I note the formidable amount of settlement evidence, including four in Ennismore Gardens, put forward by Mr Briant in support of a capitalisation and deferment yield of 6%. I give it greater weight than bank rate and leasehold valuation tribunal decisions. I accept this yield. Freehold value — Mr Duncan and Mr Briant put the value of the landlord’s freehold reversion on the termination of the existing lease at £451,350, comprising the value of the new 119-year lease at £442,500, plus 2% uplift for the freehold. The value of £442,500 comprises the value of the fourth floor, £385,000, plus 50% of the “site” value of the fifth floor disregarding the tenants’ improvements. The estimated value of the fourth and fifth floor flat (as improved and in its present state) is £500,000, and therefore site value represents 50% of £115,000, ie £57,500. Mr Duncan supports his long leasehold value by sale prices of leasehold and freehold flats, adjusted by relating the sale price to the freehold value at the date of valuation by the use of two indices. The first shows the relationship between the value of a lease, according to its unexpired term, and the freehold value. This index relates to prime property in Mayfair, Belgravia, Knightsbridge, Kensington and Chelsea. The second index shows the changing values of prime Central London flats and houses between 1979 and 1998. Mr Sharp went straight to a figure of £420,000 for both the long leasehold and freehold interests in the subject flat, disregarding the improved fifth floor, but reflecting hope value for improvement, which he put at no more than 10%. There are, therefore, two questions for my decision regarding the freehold value as at 18 September 1997: the value of the subject flat excluding improvements, ie the value of the fourth-floor accommodation and the fifth floor as unimproved; and the hope value or development value attributable to the possibility of providing a reception room and roof terrace on the fifth floor, as, in fact, was provided by the tenants following the grant of a licence in November 1961. Mr Duncan referred to six comparables to support his valuations, all adjusted by reference to the above indices to show the value as at 18 September 1997, the valuation date in this appeal. Three of these comparables are in Ennismore Gardens, one is in Rutland Gate, one Egerton Gardens and one in West Halkin Street. Mr Sharp referred to four comparables, three in Ennismore Gardens and one in Egerton Gardens. Three of Mr Sharp’s comparables are the same as Mr Duncan’s. I do not consider further the comparables in Egerton Gardens and West Halkin Street, which, due mainly to their different locations, I find to be secondary evidence compared to the primary evidence of transactions in Ennismore Gardens and nearby Rutland Gate. I have five comparables to assist me in determining the freehold value of the subject flat, which I have analysed as follows, using the indices suggested by Mr Duncan: Property (tenure) Accommodation Price (date) Equivalent freehold price Sept 1997 Flat D, 41 Ennismore Gardens (freehold) 2 rooms, kitchen, bathroom £185,000 (Oct 1996) £220,000 Flat 6, 42 Ennismore Gardens (freehold) 3 rooms, kitchen, 2 bathrooms £281,000 Mr Duncan £285,000 Mr Sharp (May 1998) £260,000 Flat E, 41 Ennismore Gardens (share of freehold) 3 rooms, kitchen, bathroom £255,000 (Sept 1997) £255,000 Flat 3, 46 Rutland Gate (share of freehold) 3 rooms, kitchen, bathroom £315,000 (Sept 1999) £291,000 Flat 6, 51 Ennismore Gardens (leasehold 77 years unexpired) 3 rooms, kitchen, bathroom, cloakroom £248,000 (Sept 1996) £334,000   I look, first, at the value of the freehold interest in the subject flat, excluding the value of the tenants’ improvements and any value attributable to the prospect of carrying out those improvements, ie essentially the value of the accommodation on the fourth floor (four rooms, kitchen, bathroom and WC). Mr Duncan and Mr Briant put this value at £392,700, ie £385,000 for the proposed long lease plus 2% for the freehold. Mr Sharp uses a figure of £420,000 for the freehold and long leasehold interests, to include hope value, which he puts no higher than 10%, giving a value, excluding hope value, of about £392,000. The equivalent freehold prices as at September 1997 above must be adjusted for differences of location, accommodation, size etc to relate them to the subject flat, particularly the additional value attributable to the additional room in the subject flat. Flat D at 41 Ennismore Gardens has only two rooms and was sold one year before the valuation date in this appeal; flat 6 at 51 Ennismore Gardens is a leasehold for 77 years and was sold one year before the valuation date, requiring two adjustments. I find the three properties, flat 6 at 42 Ennismore Gardens, flat E at 41 Ennismore Gardens and flat 3 at 46 Rutland Gate, to be the most helpful. These comparables indicate a range of values between £255,000 and £287,000 for the subject flat, subject to adjustments for differences, particularly the additional room. These figures indicate to me that Mr Duncan’s value of £392,700 is too high and that the true value of the subject flat, excluding improvements and the prospect of improvements in September 1997, was close to Mr Sharp’s figure of £382,000, which I accept. I look now at the addition for hope value or development value, representing the additional value of the potential for conversion of the fifth floor to a large reception room with roof terrace, ie the improvements that were actually carried out after the grant of a licence in 1961. Mr Duncan puts this value at £58,650, representing 50% of the 236value of the fifth floor in its converted state (£117,300, ie £115,000 plus 2%). Mr Sharp puts this value at most at 10% of the value of the fourth floor, ie about £38,200, representing 10% of £382,000. Although I do not necessarily disagree with Mr Sharp’s approach, I prefer Mr Duncan’s method of assessing this additional value. This raises two questions: the value of the fifth floor as improved and the percentage of that value that would be paid for the potential to carry out that improvement. I heard little evidence on either question. Having regard to the value I have put on the fourth floor, of £382,000, the size of the fifth-floor reception room, which is about one-third of the floor area of the fourth floor, and my inspection, I think that Mr Duncan’s figure of £117,300 for this accommodation is too high. I reduce it to £110,000. On the second question, the proportion of that value representing site or development value, I cannot accept Mr Duncan’s figure of 50%. I am aware that, using the standing-house approach to site value, that value in Central London is usually taken to be 40-50% of the entirety value. This is, however, a matter of evidence in every case. The evidence that I have in this appeal is the opinion of Mr Duncan that 50% is consistent with the standing-house approach and is appropriate here, and Mr Sharp’s opinion that this is a rule of thumb and that builders usually ascribe one-third of sale value to site value. He emphasised the difficulties of constructing the fifth-floor accommodation and the lack of planning permission, listed building consent and the landlord’s consent for this work. I prefer Mr Sharp’s opinion. I agree that there is a lack of consent for the work and that there would be physical and practical difficulties in carrying it out with consequent increased costs. In my view, the value of the potential to improve the fifth floor is one-third of the additional value, ie one-third of £110,000, £36,667. My valuation of the freehold interest in the subject flat as at 18 September 1997 is therefore £418,667, which I round up to Mr Sharp’s figure of £420,000. Marriage value The second element in the premium is the landlord’s share of marriage value. This is 50% of the marriage value (as defined) or such greater proportion of that value as is agreed or determined by the tribunal to be the proportion that would have been determined by agreement at the valuation date on a sale on the open market by a willing seller. Marriage value is defined as the difference between: (a) the aggregate of the values of the landlord’s, the intermediate and the tenant’s interests when the new lease has been granted (the proposed interests); and (b) the aggregate of the value of the landlord’s, the intermediate and the tenant’s interests under the existing lease (their existing interests). In this appeal, both parties’ calculations exclude any intermediate interest and they agree that the landlord’s share of the marriage value is 50%. Tenants’ interest under the new lease — I have found that the value of the freehold interest (unimproved) in the subject flat in September 1997 was £420,000, based on comparables relating mainly to freehold values. Mr Duncan and Mr Briant have applied a 2% uplift from the value of a 119-year lease to the freehold value. Mr Sharp has made no distinction between the two values. I agree that there is a difference between the long leasehold and freehold values and accept a 2% differential, producing a figure of £411,765, which I round to £412,000 for the value of the tenants’ long leasehold interest. Tenants’ interest under the existing lease — Mr Duncan values the tenants’ existing leasehold interest at £260,000; Mr Sharp’s figure is £290,000. Both valuers used the same approach to this value as they used for the freehold and new long leasehold values, ie to reflect in the value the potential for carrying out the improvements carried out to the fifth floor, which must be disregarded. Mr Duncan’s figure of £260,000 comprises the value of the fourth floor, £220,000, plus 50% of the “site” value of the fifth floor disregarding the improvements (£80,000 at 50%, £40,000). Mr Sharp goes directly to a figure of £290,000, disregarding the improvements carried out to the fifth floor but reflecting the hope value for improvement, which he put at not more than 10%. In assessing the value of the tenants’ existing leasehold interest as at 18 September 1997, I follow the same method I used for valuing the freehold and long leasehold interests, namely valuing the flat excluding the improvements carried out and then adding the value of the potential for improvement to the fifth floor. As to the unimproved value, excluding the potential for improvement, Mr Duncan put this value at £220,000 and Mr Sharp uses £264,000, if it is assumed that a hope value of 10% is included in his overall figure of £190,000. Both valuers refer to comparables, which I summarise as follows, using the capital values index used by Mr Duncan to relate the price to September 1997. Property (unexpired term) Accommodation Price (date) Equivalent price Sept 1997 Flat U, 24 Ennismore Gardens (30 years) 3 rooms, kitchen, bathroom, utility room £180,000 (Sept/Oct 1996) £213,500 Flat H, 24 Ennismore Gardens (29 years) 3 rooms, kitchen, bathroom, WC £180,000 (July 1997) £183,500 2nd floor, 23 Ennismore Gardens (29 years) 3 rooms, kitchen, bathroom £222,000 (March 1997) £239,000 Flat A, 4 Ennismore Gardens (30 years) 3 rooms, kitchen, 2 bathrooms £250,000 (July 1996) £302,500 These comparables indicate a range of values for the subject flat in September 1997 of between about £184,000 and £302,000. Adjustments must be made for the differences between the comparables and the subject flat and particularly for the additional room. In my judgment, the unimproved value of the short leasehold interest in the subject flat in September 1997 was £250,000. In assessing the addition to this value for potential improvement to the fifth floor, I again adopt the approach used by Mr Duncan of adding a percentage of the additional value that would be created by the improvement of the fifth floor. He uses 50% of this increase in value, which he puts at £80,000. Having regard to the value that I have put on the fourth floor of £250,000, the size of the fifth-floor reception room and my inspection, I think that Mr Duncan’s additional value is marginally high, and I reduce it to £70,000. I use the same proportion of one-third as I used for the freehold and long leasehold interests for the additional value of the potential improvement of the fifth floor, producing £23,333 additional value. My valuation of the existing short leasehold interest in the subject flat as at September 1997 is therefore £273,333, which I round down to £273,000. I note that both Mr Duncan and Mr Sharp use the same approach to the increase in value for the potential for improvement for both the freehold/long leasehold interest and the existing short leasehold interest, ie, in Mr Duncan’s case, 50% of the increase in value, and, in Mr Sharp’s case, up to 10% of the value of the existing accommodation. Neither valuer suggested that the owner of the freehold or a 119-year lease might approach the calculation of the additional value differently from the owner of a lease with only 29 years unexpired. The latter might well pay a much smaller percentage of the increase in value or of the existing value than the owner of the freehold or a Iong leasehold interest, thus producing greater marriage value and a higher premium. However, as neither valuer took this point or made any distinction in the method of calculation for the relative interests, I have no evidence on this matter and therefore do not think that I would be justified in reaching my own conclusion and departing from the approaches of both Mr Duncan and Mr Sharp. 237Conclusion I have now decided all the elements in the premium payable for the grant of a new lease. I find the amount to be £108,500, calculated as follows: Diminution in value of landlord’s interest     (a) Value prior to grant of new lease           Ground rent £125         YP 29.25 years @ 6% 13.6 £1,700       Reversion to £420,000         PV of £1 in 29.25 years @ 6% 0.182 £76,440     £78,140 Less     (b) Value once new lease is granted £420,000         PV of £1 in 119.25 years @6% 0.002 £840       Diminution in value of landlord’s interest   £77,300       Landlord’s share of marriage value     (i) Value of tenants’ interest under new lease £412,000   (ii) Value of landlord’s interest once new lease if granted 840 £412,840       Less     (i) Value of tenants’ interest under existing lease £273,000   (ii) Value of landlord’s interest prior to grant of new lease £77,300 £350,300                                                             Marriage value   £62,540                                                       Landlord’s share, 50%   0.5                                                       Landlord’s share of marriage value   £31,270       Premium payable by tenant     Diminution in value of landlord’s interest   £77,300 Landlord’s share of marriage value   £31,250 Premium   £108,570     say £108,500 I am satisfied from the evidence put before me that the decision of the leasehold valuation tribunal, fixing the premium at £94,800 is wrong. The appeal is allowed. I determine the premium payable by the tenants on the grant of a new lease of the subject flat, calculated in accordance with Schedule 13 to the 1993 Act, to be £108,500 (one hundred and eight thousand five hundred pounds). This decision so far concludes my determination of the substantive issues in this appeal. It will take effect as a decision when the question of costs has been decided, and, at that point, but not before, the provisions relating to the right of appeal in section 3(4) of the Lands Tribunal Act 1949 and Ord 61 r 1(1) of the Civil Procedure Rules will come into operation. The parties are invited to make submissions as to the costs of this appeal, and a letter that accompanies this decision sets out the procedure for submissions in writing. Addendum I have received written submissions on costs. The appellant asks for its costs on the grounds that it has been successful in this appeal because my award is greater than the respondents’ expert’s valuation, the determination by the leasehold valuation tribunal and an offer by the respondents. I was referred to decisions of this tribunal where the successful party has been awarded costs and to the Rules of the Supreme Court, Second Cumulative Supplement, para 62/2/3 and the decision in Oksuzoglu v Kay [1998] 2 All ER 361. The appellant argues that there are no special or exceptional circumstances that should deprive it of its costs. The respondents submit that the appellant should pay one-half of their costs from the date 21 days after the date of their offer. They argue that if the appellant had accepted this offer, then, allowing for interest, it would, in the light of the tribunal’s decision, have been better off than its position under the tribunal’s award. They further argue that my decision is nearer to the figure that the respondents were prepared to pay than to the figure that the appellant was prepared to accept (the appellant’s offer). In exercising my discretion as to costs, I should look at all the surrounding circumstances, and, in particular, at the efforts each party has made to come to terms and avoid a hearing. The material facts relating to costs are as follows. The determination of the leasehold valuation tribunal was £94,800. I allowed the appeal and substituted a figure of £108,500. On 18 August 1998, the respondents made an offer to settle in the sum of £105,000. On 27 August 1998, the appellant made an offer of £118,000. Both offers were on the basis that each party shall bear their own costs. The effect of a sealed offer on costs was considered by Donaldson J in Tramountana Armadora SA v Atlantic Shipping Co SA [1978] 2 All ER 870. He said at p877g: How should an arbitrator deal with costs where there has been a “sealed offer”? I think that he should ask himself the question: “Has the claimant achieved more by rejecting the offer and going on with the arbitration than he would have achieved if he had accepted the offer?”… If the claimant in the end has achieved no more than he would have achieved by accepting the offer, the continuation of the arbitration after that date has been a waste of time and money. Prima facie, the claimant should recover his costs up to the date of the offer and should be ordered to pay the respondent’s costs after that date. If he has achieved more by going on, the respondent should pay the costs throughout. The question I must ask is whether the appellant has achieved more than it would have achieved by accepting the respondents’ offer of £105,000? My determination is £108,500: the appellant has achieved more by rejecting the respondents’ offer and proceeding with the appeal. It has achieved the determination of a premium that is £13,700 more than the premium determined by the leasehold valuation tribunal, and £3,500 more than the respondents’ offer. The appellant has succeeded in this appeal, and costs should follow the event. I order that the respondents shall pay the appellant’s costs of this appeal, such costs, if not agreed, to be the subject of a detailed assessment on the standard basis by the Registrar of the Lands Tribunal in accordance with rr 44.4 and 44.7 of the Civil Procedure Rules. The procedure laid down in r 52 of the Lands Tribunal Rules 1996 will apply to such detailed assessment. Appeal allowed.