Summary

The court determined the appropriate level of deferment rate to be applied, in the circumstances, when calculating the price payable on enfranchisement or for an extended lease for houses or flats in central London.

Facts

In joined appeals, the court was required to determine the price payable on enfranchisement or for an extended lease for houses or flats in central London. One of the main issues concerned the deferment rate to be applied. The Leasehold Valuation Tribunal had determined that a deferment rate of six per cent should apply to five of the six properties and a rate of six and three quarters per cent to one of the properties together with a marriage value of 10 per cent.

Held

The no-Act assumption in the statutory provisions regarding price and value excluded any assumption that the market would take into account the probability that Parliament might legislate in the future to confer the rights excluded. Although market evidence was usually the best evidence of value, the extent of the right to enfranchise or to a lease extension was so wide that there was unlikely to be dependable market evidence in any particular case. There was not and never had been, a binding "convention" that a fixed and constant deferment rate of six per cent should be universally used. The deferment rate in each case had to be individually determined on the evidence. In the absence of dependable market transactions to provide evidence of value it was permissible to consider the money market, Gallagher Estates Limited v Walker (1973) 28 P&CR 113 applied. Decisions of the Leasehold Valuation Tribunal and the Lands Tribunal on questions of fact and opinion were not to be treated as evidence of value in later cases. They did not establish conventions or precedents. However, guidance on valuation principles or procedure might be applied or referred to in subsequent cases. It was unlikely that there could be a constant deferment rate over a period of several years despite changes in the investment market and financial indicators. Settlements relating to comparable properties were admissible as evidence of value but were subject to criticism. In the absence of reliable land market evidence, resort had to be made to the financial or money market to assess deferment rates. The starting point was a risk-free investment, best represented by index-linked gilts. Changes in deferment rates would not occur until a change in the trend in risk-free yields had become established or the continuation of a trend established a new level of yields. In the circumstances no adjustments were to be made for the different dates of valuation.

Judgment accordingly.