Summary

There was nothing as a matter of law or fairness that prevented a respondent in an appeal against a decision of the leasehold valuation tribunal from arguing for a premium payable for the grant of a new underlease which was higher than had originally been contended.

Facts

The appellant property company (C) appealed against a decision of the leasehold valuation tribunal determining £1,154,000 as the premium payable for the grant of a new extended underlease in respect of premises owned by the respondent freeholders (E). C held a full repairing and insuring underlease on a flat in a converted pair of terraced town houses which belonged to E. At the valuation date C was to be granted a new underlease with a term extended by 90 years beyond the term date of the existing underlease. C and E were in dispute over the value of both the existing underlease and the proposed extended underlease. The tribunal was required to determine (i) whether an uplift from the extended lease to the freehold value of 2% by the tribunal had been properly applied; (ii) whether, given that E had not sought permission to appeal, they were entitled to argue for a premium which was higher than that decided by the tribunal; (iii) whether E were entitled to argue for a premium which was higher than that which had been argued before the tribunal; (iv) whether hope value could be included in the value of E's reversion on the existing lease; (v) whether, if hope value was found to exist, it should be stripped out when valuing C's existing lease for the purposes of the Leasehold Reform, Housing and Urban Development Act 1993 Sch.13 para.4A. C submitted that the premium should be reduced by over £300,000. E argued that it should be increased by over £28,000.

Held

(1) The uplift of 2% was valid. (2) E were fully entitled to argue for a more favourable result than the decision of the tribunal. There was no question of C being taken by surprise as the arguments they sought to advance had been made clear in their statement of case and there was accordingly no prejudice caused, Arrowdell Ltd v Coniston Court (North) Hove Ltd (2007) RVR 39 considered. (3) There was no justification for preventing E from arguing for a premium higher than was argued before the tribunal, having regard to the Commonhold and Leasehold Reform Act 2002 s.175(4) or the decision in Pitts v Earl Cadogan, Pitts considered. There was nothing as a matter of law or fairness which required E to be restricted in such a way. (4) On a primary basis of valuation, that the decision in Earl Cadogan v Sportelli (2006) RVR 382 was correct, E had failed to prove the existence of any hope value in the existing underlease and still less had proved that it could be represented by any ascertainable sum. On a secondary basis of valuation, that the decision in Sportelli was wrong, E had failed to prove the existence of any hope value in the value of the reversion on the existing underlease. Accordingly on either the primary or secondary bases of valuation no adjustment downwards was required to the assessment of the value of the existing underlease in order to remove any such hope value. (5) Assuming that the decision in Sportelli was correct, the hope value had to be fully disregarded when valuing C's existing underlease, Sportelli considered. Following detailed valuation calculations and the application of a 2% uplift the premium was reduced from £1,154,000 to £1,055,000.

Appeal allowed