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England and Wales Lands Tribunal
You are here: BAILII >> Databases >> England and Wales Lands Tribunal >> Hildron Finance Ltd v Greenhill Hampstead Ltd [2008] EWLands LRA_120_2006 (10 January 2008)
URL: http://www.bailii.org/ew/cases/EWLands/2008/LRA_120_2006.html
Cite as: [2008] EWLands LRA_120_2006, [2008] 4 EG 168, [2008] 1 EGLR 179

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LRA/120/2006
LANDS TRIBUNAL ACT 1949
LEASEHOLD ENFRANCHISEMENT - collective enfranchisement - price - valuation date -
deferment rate - porter’s flat - whether saleable and whether notional rent to be included in
service charge – price determined at £2,835,255
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE LEASEHOLD
VALUATION TRIBUNAL FOR THE LONDON RENT ASSESSMENT PANEL
BETWEEN
HILDRON FINANCE LIMITED
and
GREENHILL HAMPSTEAD LIMITED
Appellant
Respondent
Re: 1-138 Greenhill
Prince Arthur Road
London NW3 5TY
Before: His Honour Judge Reid QC and Mr N J Rose FRICS
Sitting at Procession House, 110 New Bridge Street, London EC4V 6JL
on 12 and 13 November 2007
Kenneth Munro, instructed by Pemberton Greenish, solicitors, for the appellant
Paul Letman, instructed by Coleman Coyle LLP, solicitors, for the respondent.
© CROWN COPYRIGHT 2007
1
The following cases are referred to in this decision:
Earl Cadogan and Cadogan Estates Ltd v Sportelli and Others [2006] RVR 382
Earl Cadogan and Cadogan Estates Ltd v Sportelli and Others [2007] EWCA Civ 1042
West Hampstead Management Co Ltd v Pearl Property Ltd [2002] 3 EGLR 55
Agavil Investments Ltd v Corner and Others CA,(1975) 3 October, unreported CA
Blendcrown Ltd v Church Commissioners for England [2004] 1 EGLR 143
Gilje and Others v Charlgrove Securities Ltd [2002] 1 EGLR 41
Earl Cadogan and Another v 27/29 Sloane Gardens Ltd and Another [2006] 2 EGLR 89
2
DECISION
Introduction
1.      This is an appeal by Hildron Finance Limited, the landlord of a block of flats known as
1 to 138 Greenhill, Prince Arthur Road, Hampstead, London, NW3 5TY, against a decision of
the Leasehold Valuation Tribunal for the London Rent Assessment Panel on a collective
enfranchisement under section 13 of the Leasehold Reform, Housing and Urban Development
Act 1993. The LVT determined that the price payable for the freehold interest in that property
by the respondent nominee purchaser, Greenhill Hampstead Freehold Limited, should be
£2,298,172. This figure was subsequently amended to £2,089,172. In both cases the price
included £582,000, representing the agreed value of the intermediate landlords’ interests in
flats 17 and 70.
2.      Permission to appeal by way of rehearing was granted by the President in respect of the
following issues: valuation date, deferment rate, hope value and the value of the porter’s flat.
The appellant contended that, ignoring hope value, to which we refer later, the price payable
should be £2,935,255 assuming the correct valuation date was 20 January 2005, the date of the
landlord’s counter notice, as decided by the LVT, or £2,983,521 assuming the appropriate date
was 31 January 2006, the date of commencement of the LVT hearing. The respondent’s expert
considered that the LVT’s valuation was too low, but the respondent did not ask the Tribunal to
determine a figure below that fixed by the LVT.
3.      Mr Kenneth Munro of counsel appeared for the appellant. He called two expert
witnesses, both partners in Messrs Knight Frank of 20 Hanover Square, London W1S 1HZ,
namely Mr Robert Orr-Ewing and Mr David Charles Radford. Mr Radford’s evidence was
confined to the valuation of the porter’s flat (No.9). Counsel for the respondent, Mr Paul
Letman, called one expert witness, Mr Bruce Roderick Maunder Taylor, FRICS MAE, a
partner in Messrs Maunder Taylor of 1320 High Road, Whetstone, London, N20 9HP.
4.      The parties did not suggest that it was necessary for us to inspect the appeal property or
any of the other buildings referred to and we did not do so.
Facts
5.      From the evidence we find the following facts. The appeal property lies at the northern
end of the Fitzjohn/Netherhall Conservation Area. Part of the block fronts Greenhill and part
fronts Prince Arthur Road. The Greenhill elevation overlooks the main High Street, which is at
a lower level and is part of a busy shopping location, a short walk from Hampstead
underground station.
3
6. The appeal property was built in the early 1930s. It is of multi-storey construction but,
because of the sloping site, parts are on three storeys and parts on five. The property is
generally of solid construction, although the top floor accommodation is contained within a
timber framed mansard roof, with brick-built cross walls. There are a number of entrance
halls/staircase areas serving different parts of the block. Each entrance hall is served by a lift.
The gross internal area of each flat varies between 547 and 1,695 sq ft and there is one studio
flat of 400 sq ft. There is a small brick built porter’s lodge at the north-eastern corner of the
site, a number of garages, limited areas for parking on site and some common areas such as
refuse store and boiler room.
Deferment rate - Mr Orr-Ewing’s evidence
7.      Depending upon the correct valuation date, the unexpired terms of the existing
unextended leases were either 63.17 or 62.15 years. Mr Orr-Ewing considered that the
deferment rate of 7% determined by the LVT was too high. In his initial report dated 29 March
2007 he placed considerable reliance on this Tribunal’s decision in Earl Cadogan and
Cadogan Estates Limited v Sportelli and Others [2006] RVR 382, published after the LVT’s
decision which is the subject of this appeal. He considered that Sportelli represented a
benchmark on deferment rates to which valuers should pay serious attention and he
summarised the findings of the decision which he considered particularly relevant.
8.      Mr Orr-Ewing said that he had heard the evidence in Sportelli and had given evidence
himself. He deferred to the Lands Tribunal’s approach to the calculation. He also agreed with
the specific rates found by the Tribunal to reach a generic deferment rate of 4.75%. As for
market evidence, he had said in Sportelli and was still of the view that there was not sufficient
evidence, nor did it point sufficiently in a single direction, for it to be adopted in preference to
another approach.
9.      On the question of the length of lease, Mr Orr-Ewing said that he had given evidence in
Sportelli that in his view there was less interest from investors when the unexpired terms
exceeded 50 years. He remained of that view, which was contrary to the conclusion reached by
the Tribunal in Sportelli, but whether it affected the deferment rate depended on the view the
Tribunal took regarding market evidence.
10.    Mr Orr-Ewing said that location was not a factor for his client in Sportelli. Historically,
location would have been a factor in the location of the appeal property, to mark the distinction
between Hampstead and Belgravia. In Sportelli the combined views of all the financial experts
who gave evidence was that, given a sufficient length of time, growth rates would be the same
regardless of area. Mathematically, they said, that was an invariable rule. Mr Orr-Ewing was
not a financial expert, but he bowed to their judgment. The only question was whether growth
rates would differ over the period of these particular leases. The shortest unexpired term in this
appeal was 63.17 years. That was a long enough period for any short-term distortions due to
local fluctuations to work themselves out. He therefore agreed that there should be no
adjustment to reflect location.
4
11.    As for obsolescence and condition, in the absence of any building or structural survey
casting doubt on the ability of the structure to last until the end of the lease terms, he saw no
reason for an adjustment to the Sportelli deferment rates. The Lands Tribunal had based its
decision on whether the condition of a building would affect the current vacant possession
value. It was difficult to imagine a situation where an investor would disregard the condition
of a building when considering its present capital value, but take it into account when
considering the appropriate deferment rate.
12.    The Tribunal had considered the distinction between flats and houses in detail. Although
his client’s property in Sportelli (59 Cadogan Square/105 Cadogan Gardens) was a relatively
small block, another of the properties considered, Maybury Court, was a substantial building of
five blocks totalling 68 flats. The Tribunal would in his view have been wrong not to make a
distinction for the difficulties of management. But it did make such a distinction and added
0.25% to the generic rate. He agreed that managing a block of flats was more complicated than
managing a house, but the burden of management was devolved through a management
company and managing agents, so it did not fall directly on the investor. On balance he felt
that a distinction of 0.25% between houses and flats, as determined in Sportelli, was
appropriate and that a deferment rate of 5.0% should be adopted when valuing the appeal
property.
13.    Mr Orr-Ewing produced a further report dated 9 November 2007, in response to an
addendum statement prepared by Mr Maunder Taylor. In it he expressed the view that the
same deferment rate was appropriate for Hampstead properties in general, and the appeal
property in particular, as had been determined by the Tribunal in Sportelli for properties which
were there stated to be in the Prime Central London area (PCL). There was no clear definition
of PCL, but Hampstead had been included within the PCL area as used by Messrs Savills
research department, both for flats and houses. It had also been included in the prime London
area as defined by Messrs Knight Frank, although not in the Knight Frank prime central
London area.
14.    Mr Orr-Ewing produced various statistics prepared by Lonres.com which showed that the
values of flats in Hampstead had been rising over the last three years, and that in that time
substantial numbers of properties in the area had sold for more than £1,000,000 and over
£1,000 per square foot. These statistics suggested that Hampstead properties were prime. He
also produced a chart showing that the growth in flat values in north London had been very
much in line with the growth in the values of all PCL properties between 1992 and 2005.
15.    Finally, Mr Orr-Ewing noted that it had been accepted in Sportelli that Maybury Court
was part of PCL. He had seen Maybury Court and in his opinion the appeal property compared
favourably with it, both in terms of location and building quality.
16.    In the course of cross-examination Mr Orr-Ewing expressed the following opinions. The
residential market in central London was less exposed to concerns over the availability of
mortgages than properties further from the centre. The availability of mortgages had a greater
effect on the value of short leases than on long leases. One would expect greater price
5
volatility outside a prime residential area. The demand for residential property in Hampstead
was no more volatile than in St James’s. Although he was not a building surveyor the appeal
property appeared to be, whilst not a period building, nevertheless a solid, properly built
structure in a prime, but not central area. The quality of construction of a flat or house was
usually reflected in its current market value. The purchaser of a flat would usually bear in
mind his likely period of ownership when deciding how much to offer and that period was
probably between 5 and 20 years. The short term situation was usually the best guide to the
likely position over a longer period, but with a poorly built building there would be a greater
perception of risk in the longer term. The internal layout of any block of flats was likely to
become out-dated over a period of time, but most buildings could be reconfigured to adapt to
the new demand; the important question was whether the particular building would still be in a
primarily residential area at the end of the lease and there was no reason to suppose that the
appeal property would not do so. Investors would be more concerned about the long term
condition of a property if it were located in a declining residential area. Management problems
arose from time to time in most residential buildings and tended to be resolved; the deferment
rate would only increase if there was an unusual risk of such problems recurring in the long
term. The risk of unrecovered service charges was reflected in Sportelli by a 0.25% addition
to the deferment rate for flats.
Deferment rate - Mr Maunder Taylor’s evidence
17.    In his first report, dated 23 March 2007, Mr Maunder Taylor expressed the view that a
deferment rate of 8.0% was appropriate having regard to the rate which would be charged by
banks for lending for speculative property investment. It was also appropriate by reference to
the rates applicable to commercial property investments in the Hampstead area. He produced
details of four mixed retail and residential investments which had sold at auction between
September 2004 and June 2005, showing initial yields ranging from 4.49% to 6.20%. Investors
in such properties would receive an immediate rental return plus future growth. By
comparison an investor in the hypothetical valuation exercise which he was undertaking would
receive growth but no income, because the capital value of the ground rental income was
calculated separately. With these considerations in mind, he thought that an investor who
know he would receive the benefit of growth only would require a return of 8% per annum and
that the deferment rates determined in Sportelli were out of step with what was available for
other property investments with similar characteristics.
18.    Mr Maunder Taylor outlined various management risks and responsibilities which would
be incurred by a purchaser of the appeal property as a result of its liability for the common
parts and common services and the attendant litigation risks. He pointed out that, when the
block was purchased by the appellant in March 1986, the vendor (Sunley) retained for 21 years
the right to the gross premiums received for all extended leases granted following the surrender
of any of the original 99 year leases, less legal and surveyor’s fees incurred. Mr Maunder
Taylor also referred to disputes between the appellant and its lessees resulting from the
appellant’s attempts to erect radio masts on the roof and to develop the roof space area, as well
as the risk of litigation resulting from the inclusion in the service charge of a notional rent for
the porter’s flat. Finally, he said that the appellant had informed the lessees that it proposed to
carry out external redecoration in 2007 at a total cost, including maintenance repairs, in the
6
order of £1m. Mr Maunder Taylor considered there was a risk that the lessees would claim
that the budgeted figure of £149,409 (net of fees and VAT) for window repairs has arisen in
part because of neglect to the paintwork for many years. There was a further risk that some
lessees would claim that the costs generally were more than they should be because of the
appellant’s failure to redecorate since 1995.
19.    In Mr Maunder Taylor’s opinion the appeal property had a very different management
and risk profile from the properties considered in Sportelli, where the management
responsibilities had been separated from the freehold, and a higher deferment rate should
therefore be adopted. In the course of oral evidence he quantified the appropriate differential
at 0.75%.
20.    Mr Maunder Taylor expressed further disagreements with the conclusions reached in
Sportelli. He quoted paragraph 88 of the Tribunal’s decision in Sportelli, which read as
follows:
“While we accept the view of the valuers that the deferment rate could require
adjustment for location, on the evidence before us we see no justification for making any
adjustment to reflect regional or local considerations either generally or in relation to the
particular cases before us. The evidence of the financial experts suggests that no
adjustment to the real growth rate is appropriate given the long-term basis of the
deferment rate, and locational differences of a local nature are, in the absence of clear
evidence suggesting otherwise, to be assumed to be properly reflected in the freehold
vacant possession value.”
In Mr Maunder Taylor’s opinion the deferment rate should (not could) be adjusted to reflect
the relative locational advantages of different properties in dissimilar locations.
21.    Mr Maunder Taylor also disagreed with the real growth rate of 2.0% determined in
Sportelli. He felt the figure was too high, because it was based on long-term data with no
deduction made to reflect physical improvements to the general stock of properties over the
years in question. Moreover, the Tribunal had said it had assessed the risk premium by
considering the individual components of the risks of investment in long term reversions,
namely volatility, illiquidity, deterioration and obsolescence. In fact, said Mr Maunder Taylor,
the Tribunal had failed to take account of obsolescence in the true sense of the word. It had
discussed the issue of dilapidated buildings, building quality and condition. These matters
related only to the building and thus the issue of deterioration. Obsolescence was something
quite different. It took into account the usefulness of the building on the one hand and its
relationship to site value and development potential on the other. He sought to illustrate the
difference with two extreme examples. Firstly, in a slum clearance area the buildings will have
deteriorated to the point where they should have been redeveloped some time ago, but the site
value was so low that no private investor could be found to carry out the redevelopment. On
the other hand, the office buildings in the Broadgate development in the City of London were
only about 20 or 25 years old, but their site value might now justify the erection of much taller
buildings on the site. Therefore, although they were prime buildings subject to little
deterioration, there was already an issue of possible obsolescence. Mr Maunder Taylor
7
considered that there was an insufficient allowance for obsolescence and deterioration within
the 4.5% risk premium determined in Sportelli.
22. Mr Maunder Taylor thought that the proportion of the value of the appeal property
attributable to the site was high and the value of the buildings was low because the flats did not
have the design, accommodation layout, services, facilities, and the fittings and finishes which
were normally expected in Hampstead flats on comparable sites. The property was in a
conservation area. There would always be a requirement for any building on the site to have
external and other design characteristics which fitted into the conservation area. The present
external design was appropriate to the conservation area status. The building, however, was
about 70 years old and would be between 130 and 135 years old at the termination of the
relevant leases. In Mr Maunder Taylor’s opinion the extent of deterioration and obsolescence
at that stage would be significant, if not substantial and a purchaser of the reversionary
investment would reflect that factor in his bid.
23. Mr Maunder Taylor considered that prime central London properties were in general less
prone to obsolescence than properties such as the appeal property. On the other hand, a typical
1960s suburban block of flats would be more prone to obsolescence than the appeal property.
In his opinion the physical characteristics of the appeal property justified a deferment rate
higher than that appropriate for a property in PCL.
24. Mr Maunder Taylor also disagreed with the Sportelli’s approach because, he said, it did
not reflect termination risks within its 4.5% risk premium. He gave two examples of cases
when landlords had had difficulty in obtaining possession when the original ground leases
expired. Although it was not possible to quantify the effect of such termination risks by
reference to open market evidence, Mr Maunder Taylor considered that an additional risk
margin of 2% was appropriate to reflect this factor.
25. In his expert report Mr Maunder Taylor also considered the extent to which the 1993 Act
had affected prices paid for ground rent investments in the real world. He expressed the view
that such interests were more valuable with the Act than they had been without the Act. There
were four reasons for this view. Firstly, the proceeds of sales under the Act attracted the
benefit of roll-over tax relief. Secondly, the Act itself had encouraged leaseholders to seek
lease extensions, resulting in investors obtaining their half share of marriage value earlier than
they would have done without the Act, thereby increasing their cashflow and profitability.
Thirdly, purchasers of leasehold flats were encouraged by their solicitors and mortgage lenders
to seek lease extensions in circumstances where many of them would not have been
encouraged to do so before the Act. Finally, the Act provided a recognised method of
calculating the premium payable by the leaseholder. This added certainty to the investment and
reduced the investment risk. It followed, said Mr Maunder Taylor, that a deferment rate, which
was appropriate in the with-Act world, was lower than the rate, which would have been
applicable in otherwise identical circumstances in the no-Act world.
8
26.    Mr Maunder Taylor’s addendum report was dated 6 November 2007, after publication of
the Court of Appeal judgment in Sportelli [2007] EWCA Civ 1042. He now accepted that, for
the purposes of the present exercise, no evidence should be relied upon which was rooted in
open market evidence. He observed, as did Mr Orr-Ewing, that there was no defined
geographical area with recognised boundaries comprising Prime Central London. In his view,
for a property to be regarded as being within PCL it must be in central London and it must be
prime. Hampstead was not in central London, it was in north-west London. Nor was the
appeal property prime in the sense that properties in Cadogan Square, Eaton Square or Harley
Street were prime. One of the properties considered in Sportelli - Maybury Court - was not
prime by comparison with Cadogan Square. But it was found to be prime by the Lands
Tribunal. It appeared that the Tribunal had used the word “prime” in a general sense to include
properties on certain London estates but not others. In Mr Maunder Taylor’s view the fact that
a property was on a particular estate, and therefore owned by a particular landlord, was not
relevant to the issue whether it was prime. In his view, London residential properties which
were truly prime had international market appeal and, because of that, a resistance to market
down-turns which non-prime properties did not have.
27.    Mr Maunder Taylor also took issue in his addendum report with para 91 of the Lands
Tribunal’s decision in Sportelli, which said:
“As with location, while we do not rule out the possible need to adjust the deferment
rate to take account of such matters as obsolescence and condition, we think that it
would only exceptionally be the case that such factors were not fully reflected in the
vacant possession value and the risk premium. Evidence would be needed to establish
that they were not fully reflected in this way. Although Mr Orr-Ewing made a
deduction in respect of 59 Cadogan Square and 105 Cadogan Gardens to reflect what he
said was the low risk of obsolescence, no such deduction was made by Mr Clark on
behalf of the freeholders, and we can see no justification for doing so.”
28.    Mr Maunder Taylor did not agree that the risks of future obsolescence were necessarily
reflected in the current vacant possession value. That value reflected the outlook of purchasers
and their mortgagees at the valuation date. In his experience most purchasers expected to own
their flats for between 5 and 20 years; most mortgagees lent for a term of 25 years but expected
a sale or mortgage to redeem the loan earlier. Both purchasers and mortgagees expected the
building to remain viable during that period, whilst many purchasers would expect to carry out
improvements to defer the effects of gradual obsolescence. Neither purchaser nor mortgagee
would consider the likely obsolescence over the whole of the next 63.5 years, particular on the
assumption that there would be no improvements within that period.
29.    In the course of cross-examination, Mr Maunder Taylor gave the following additional
evidence. He had no knowledge of the reasons for the decisions of the great London estates to
grant intermediate head leases of many of their buildings, thus separating themselves from the
immediate responsibilities of management. At the valuation date a prospective purchaser
would have been aware that the tenants at the appeal property might in the future choose to
exercise their right to manage the block. He did not know whether the tenants had asked for
the necessary building works to be delayed because they lacked sufficient funds to pay for
9
them immediately. He did not know how many applications for lease extensions had been
made between the valuation date and March 2007, when the Sunley deed expired. He accepted
that the last application for planning permission to redevelop the roof space had been made in
1991.
Deferment rate - Conclusions
30.    The starting point for any consideration of the deferment rate must be the decision of
this Tribunal and the judgment of the Court of Appeal in Sportelli. The Tribunal at para 79
concluded that the generic deferment rate should be 4.75%. On length of term its conclusion
(para 85) was that the deferment rate was constant beyond 20 years; that below 20 years the
rate would need to have regard to the property cycle at the time of valuation; and beyond 75
years there was no reason on the evidence to conclude that the rate would be either higher or
lower. On location and on obsolescence and condition the Tribunal reached the conclusions we
have reproduced in paras 20 and para 27 of this decision above. Finally, on the difference
between houses and flats, the Tribunal’s conclusions were as follows (para 95):
“In Arbib the adjustment of 0.25% was intended to reflect both the greater management
problems associated with flats and the possibility that there might be a better prospect of
growth in the house as opposed to the flat market. As to the second of these factors we
accept Mr Clark’s view that any disparity between growth rates for houses and flats is
likely to even out over the longer term. We think, however, that an adjustment needs to
be made to reflect the management problems, although we do not consider it appropriate
to differentiate between flats that are subject of headleases and those which are not. Nor
do we think that the management concerns are necessarily so much less for a single flat
than for a block to warrant a different adjustment. Even where flats are efficiently
managed, service charge and repairs problems inevitably occur, and the management
exercise in itself is, we feel, sufficiently more complex to warrant a generalised 0.25%
addition for flats. We do not consider that any fine-tuning below this percentage is
justified.”
31.    The Tribunal’s approach was thus to identify a generic deferment rate, which LVTs
should treat as generally applicable, whilst recognising that this could be subject to variation in
particular cases when this was clearly justified by the evidence. The Court of Appeal
recognised the appropriateness of such guidance. At para 99 Carnwath LJ said:
“I agree with the Tribunal that an important part of its role is to promote consistent
practice in land valuation matters. It was entirely appropriate for the Tribunal to offer
guidance as they have done in this case, and, unless and until the legislature intervenes,
to expect leasehold valuation tribunals to follow generally that lead.”
10
32.    The decision in Sportelli related to properties that the Tribunal accepted as being within
prime Central London. So far as properties outside this area were concerned, Carnwath LJ
said:
“The Tribunal’s later comments on the significance of their guidance do not distinguish
in terms between the PCL area and other parts of London or the country. However, there
must in my view be an implicit distinction. The issues within the PCL were fully
examined in a fully contested dispute between directly interested parties. The same
cannot be said in respect of other areas. The judgment that the same deferment rate
should apply outside the PCL area was made, and could only be made, on the evidence
then available. That must leave the way open to the possibility of further evidence being
called by other parties in other cases directly concerned with different areas. The
deferment rate adopted by the Tribunal will no doubt be the starting point; and their
conclusions on the methodology, including the limitations of market evidence, are likely
to remain valid. However, it is possible to envisage other evidence being called, for
example, on issues relevant to the risk premium for residential property in different areas.
That will be a matter for those advising future parties, and for the tribunals, to consider as
such issues arise.” (para 102)
33.    With that guidance in mind, the first question that arises is the extent of the PCL area.
Considered geographically, there is no precise boundary line. As defined by Messrs Savills, a
firm with considerable experience of producing research data on the London residential
property market, PCL includes Hampstead, but it is not clear whether their use of the term is
intended to cover all properties in Hampstead, or merely prime properties. Another well
known residential agent, Knight Frank (in which the appellant’s experts are partners) excludes
Hampstead from its “prime Central London” area although it includes it in its “prime London
area”. Mr Orr-Ewing accepted that practical considerations sometimes influenced the
decisions made by agents when choosing the precise boundaries of prime Central London. We
do not think Hampstead can properly be described as being within Central London. For that
reason we conclude that, for the purposes of applying the Sportelli guidance, the appeal
property is to be taken as falling outside the PCL even though Hampstead is a prime residential
area.
34.    We therefore turn to consider whether, in this case which concerns a property outside the
PCL, the evidence has demonstrated that a departure from the deferment rate adopted in
Sportelli is justified. Mr Maunder Taylor suggested that the rate appropriate to the appeal
property should be three percentage points higher than that adopted for the flats in Sportelli.
He made three individual adjustments, 0.75% for exceptional management problems, 1.5% for
the location and 2.0% for termination risks. These adjustments totalled 4.25%, pointing to a
deferment rate of 9.25%, but Mr Maunder Taylor said that valuation was not a mathematical
process and his overall judgement told him that a deferment rate of 8% was right. To the
extent that he did not withdraw his criticisms of the Tribunal’s approach in Sportelli, Mr.
Maunder Taylor’s evidence is clearly unsustainable in the light of the Court of Appeal’s
judgment.
11
35.    Mr Maunder Taylor considered that the degree of obsolescence of the appeal property
was unusually high, since it would be at least 130 years old when the existing leases expired.
We do not think that age on its own can be the appropriate test; the question is whether
obsolescence and condition are not fully reflected in the vacant procession value and the risk
premium. To the extent that the flats are, as Mr. Maunder-Taylor suggested, deficient in
design, layout, services, facilities, fittings and finishes, these factors would presumably be
reflected in their present vacant possession value. In our judgment the only factor mentioned
by Mr. Maunder Taylor which might have a greater effect on the value at the end of the lease
than it does now is the mainly timber construction of the top floors. We have borne this
consideration in mind, but we have concluded that a purchaser would not feel it to be
sufficiently significant to justify an increase in the deferment rate to be applied. (We would
add that, when considering the impact of obsolescence on the deferment rate, the possibility
that site value might exceed existing use value does not seem to us to be relevant. In this
context obsolescence is concerned with the risk that a building will decline, not that the value
for another purpose will increase). As far as volatility and illiquidity are concerned, none of
the evidence has led us to conclude that the position is any worse in the case of the appeal
property than the more centrally located properties considered in Sportelli.
36.   We do not consider that any adjustment to the Sportelli starting point should be made to
reflect the possibility that difficulties might arise in obtaining possession of the appeal property
when the existing leases expire. Again, we are not satisfied that the relevant circumstances
here are any different from those at the flats considered in Sportelli – which ranged from a
single flat to a block of 68.
37.   We now turn to the adjustment to be made to the generic deferment rate to reflect the facts
that the appeal property is a block of flats and not a house, and that the freeholder has direct
responsibility for managing the building. In Sportelli the Tribunal concluded that it was not
appropriate to differentiate between flats which were the subject of headleases and those which
were managed direct by the freeholder. The Tribunal left open the possibility that there could
be a case for an additional allowance where exceptional management difficulties were in
prospect, but we do not think that, at the valuation date, a purchaser of the appeal property
would have anticipated such difficulties occurring over the long term. The Sunley deed was
due to expire shortly, it is not clear that the delay in carrying out the necessary works to the
property was due to any fault on the part of the freeholder, the last planning application to
develop the roof had been made in 1991 and, apart from police involvement in a dispute over
the proposed radio mast on the roof, there is no clear evidence of any unusual management
problems having been experienced in the past.
38.    In summary, none of the evidence in this appeal has persuaded us that the deferment rate
should be different from the 5% applied to the flats in Sportelli.
39.    We should add that, in an effort to show that the long-term growth rate of flats in north
London was comparable to that in the PCL, Mr Orr-Ewing produced a graph showing the
movement in values in both areas over a 13 year period. We do not consider that such a short
period - which coincided with a general upward movement in values - is adequate for the
12
purpose for which it was intended. In order to provide a reliable indication of the long term
movement in residential values so as to justify a departure from the Sportelli starting point, we
consider that a period in the region of 50 years should be looked at, and that a series of
statistics with different starting dates should be considered in order to ensure that an
unrepresentative period is not relied upon.
The valuation date
40.    There is an issue as to the correct valuation date. Before the LVT the respondent
contended for the counter-notice date, 20 January 2005, whilst the appellant contended for the
date of the LVT hearing, 31 January 2006. The LVT upheld the submissions of the
respondent. Cases of such a dispute are likely to be rare in the future because of the
amendments to the 1993 Act by the Commonhold and Leasehold Reform Act 2002 which provide
for a fixed valuation date. The point which arises in this case can only arise in the case of
claims made before the 2002 Act came into force.
41.     In this case the valuation date is, under paragraph l(l)(a) of Schedule 6 to the 1993 Act,
“the date when it is determined, either by agreement or by a leasehold valuation tribunal
under this Chapter, what freehold interest in the specified premises is to be acquired by
the nominee purchaser, or if there are different determinations relating to different
freehold interests in the specified premises, the date when determinations have been
made in relation to all the freehold interests in the premises.”
42.    The parties are agreed that the test to be applied in such cases in deciding when it is that
the “freehold interest in the specified premises … to be acquired” is determined is that
propounded in Blendcrown v Church Commissioners [2004] 1 EGLR 143 and West Hampstead
Management v Pearl Property Ltd [2002] 3EGLR 55. It is, on those authorities, the date when
in substance the extent and quality of the freehold to be conveyed is agreed or determined so
that a conveyance embodying those matters can be prepared in accordance with section 34 and
schedule 7.
43.     The issue turns on whether the covenants sought by the appellants in the draft TR1 attached
to the section 45 counter-notice went to the extent and quality of the freehold to be conveyed. The
terms of the relevant paragraph (paragraph 12) were as follows:
“The Transferee covenants with the Transferor to observe and perform the covenants
on the part of the landlord contained in the leases referred to in the Schedule of Notices
of Leases to the above title and any other subsisting leases or tenancies of the Property
(‘the Leases’) and to indemnify the Transferor against all claims demands and liability
in respect of any future non-observance or non-performance thereof arising from the date
hereof.”
13
44. The difference between the parties before the LVT was as to the inclusion of the words
“any other subsisting leases or tenancies of the Property” in the transfer. The LVT concluded that
the disputed words should not be included in the transfer and against that conclusion there has
been no appeal. The question is as to the effect of the existence of that dispute before the LVT on
the valuation date.
45. The appellant contended that there was no rational basis for choosing the date of the
appellant's counter-notice, unless the appellant’s counter-notice agreed the freehold interest in the
specified premises which is to be acquired by the nominee purchaser following the decision of
the LVT as to the price to be paid. It was submitted that where the parties had not agreed, the date
of determination had to be one of: (i) the date of the hearing; (ii) where the hearing takes place
over a period of time, the last hearing date; or (iii) the date of the LVT's decision.
46. The following points were said to support the appellants' contention:
46.1    It gives a date which is consistent with the date under individual lease claims,
where the date was fixed by Schedule 13, paragraph 1.
46.2    There is no logical reason why there should be different valuation dates.
46.3    The second half of the statutory definition in Schedule 6 provides for a single
date which is the date of the last of multiple determinations.
46.4     The reference to “what freehold interest” and “the specified premises”
indicates that the freehold is not a monolithic interest: “what” has to be given some
meaning. “What” could not refer, for instance, to the quality of the title or of the title
guarantee to be given for that is dealt with in detail in Schedule 7, paragraph 2(2)(a)
and (b).
46.5  “What freehold interest” is the freehold interest after determination of the issues
which Schedule 7 requires to be addressed (“Schedule 7 issues”), i.e. issues in respect
of the Law of Property Act, 1925, s.62 and s.63 (para 2); easements etc (para 3); rights of
way (para 4) and restrictive covenants (para 5).
46.6   Any other date would provide the LVT with an insuperable difficulty (and a
logical impossibility) if the valuation date preceded the date when Schedule 7 issues
were resolved: in those cases where Schedule 7 issues had valuation implications, the LVT
would not know what it was valuing. It is no answer to try and draw the line between
Schedule 7 issues which do or might have valuation implications and those that do not
because the LVT would still have to determine whether there were valuation
implications before deciding upon value.
47. Mr Munro submitted that until 13 October 2003 leases of less that 21 years were not
registerable, but took effect as overriding interests under the Law of Property Act 1925, s.70.
The Commonhold and Leasehold Reform Act 2002 had reduced the length of leases which must
be registered from 21 to 7 years. Leases of less than 21 years still took effect as overriding
interests under Schedule 4 of the 2002 Act. Thus the vendor of a freehold interest subject to
leases needed the direct covenant sought in the draft TR1 to provide it with a remedy if the
purchaser failed to observe covenants in the unregistered overriding leases, or the lessee(s)
14
sought to enforce those covenants, or seek damages for breach, against the vendor. This was why
the issue as to whether there should be an indemnity went to the extent and quality of the
freehold and the covenant of indemnity went to the heart of the freehold to be conveyed.
Accordingly the effect of the dispute as to the words in paragraph 12 was that there was no
agreement as to the substance and quality of the freehold interest and therefore the valuation
date could not be the date of the counter-notice.
48.    Mr Letman contended that whether or not the disputed words were included and even if
there were any short term unregistered leases (which the respondent believed there were not), it
was a "phantom point". The dispute did not go to the quality of the freehold. An indemnity of
this type was not within Schedule 7 of the Act, and was therefore not a matter for the LVT.
There was nothing in the counter-notice to indicate any disagreement about the quality of the
interest. The appellant's counter-notice had raised no issue regarding the extent or quality of the
parcels nor made any leaseback proposals. Further, reference to the draft transfer showed that no
rights were proposed to be granted or retained under paragraphs 7 and 10 of the counter notice.
49.    Paragraph 11 of the counter notice, he submitted, proposed that the terms of the transfer were
to be “in accordance with section 34 and Schedule 7 of the Act.” So, unless the terms of the
transfer conformed to Schedule 7 or were otherwise agreed they could not be imposed on the
respondent (as provided by section 34(9)) and hence could have no effect upon the quality of the
freehold.
50.    Alternatively, Mr Letman submitted, the taking of an indemnity from the nominee purchaser
transferee in respect of any future breach of the landlord’s covenants in any unregistered leases
is not a provision which by its very nature can be said to affect the extent or quality of the freehold.
It does not go to the quality of the proprietary interest. Moreover, as a matter of fact the
indemnity could make no difference to the freehold because there was no evidence of any short
term (unregistered) leases existing at all. He further referred to the evidence of Mr Maunder
Taylor to the effect that as best as he could remember, at no point in his lengthy career had he
been asked to advise about an indemnity clause in the contract in relation to a valuation
whether as part of his original valuation instructions, as part of any standard valuation report
form, or as a question put to him after delivering his valuation report.
51.    As a further alternative, the respondent submitted that the appellant was estopped by
representation from asserting that the valuation date was other than 20 January 2005. In letters
dated 3 and 8 August 2005 the respondent had asked for confirmation that the date of the counter-
notice be taken as the valuation date, but there was no reply from the appellant. Thereafter a hearing
fixed for September 2005 was adjourned at the request of the appellant, without any indication
that the valuation date remained in issue. In this context it was said that the appellant's lack of
response to the August correspondence amounted to a representation that the valuation date was
agreed, and the respondent relied on that representation in not opposing the adjournment of the
September hearing or seeking a preliminary determination regarding the terms of the conveyance.
The contents of the transfer were again raised between the parties in December 2005, but there
was still no indication from the appellant that there was an issue as to the valuation date.
15
52.    In our view the LVT was correct in the circumstances of this case to take the valuation
date as the date of the appellant’s counter-notice.
53.    The counter-notice took no issue as to the extent of the leasehold interest. The contested
words in this case could not be said to raise any issue as to the quality of the freehold, given
that so far as the evidence went there were no unregistered leases in respect of which the
indemnity could bite, and the point was in truth a phantom point. The question whether there
were any such leases was plainly raised and if there had been any, the appellant would have
been in a position to adduce evidence as to what those leases were.
54.    Even if there had been any such leases, it seems to us that the requirement of an
indemnity could not properly be regarded as going to the quality of the freehold interest. The
indemnity would have been a personal liability undertaken by the purchaser rather than an
incumbrance on the property.
55.    Finally, we take the view that the appellant is in any event estopped from arguing for any
valuation date other than the date of the counter-notice. As Arden LJ noted at paragraph 65 in
the West Hampstead case manoeuvring can still occur [to seek to obtain advantage in relation
to the valuation date] and it is a matter for the LVT to ensure that parties do not use it
improperly, so far as it can, when the matter is brought before it. Here the appellant gave a
clear impression that there was no dispute as to the valuation date and as a result lulled the
respondent into not taking any steps either to oppose its application for an adjournment or to
have the disputed issue decided timeously.
Hope value
56.    In Sportelli the Lands Tribunal held that hope value should, if recoverable, be quantified
separately from the deferment rate but was not recoverable at all in valuations under the 1993
Act. The appellant in this appeal wished to argue that hope value is recoverable in valuations
under the 1993 Act, to adduce evidence as to the amount of that hope value and to persuade us to
accept the methodology adopted in Sportelli that hope value is equivalent to 20% of marriage
value. However, since the Lands Tribunal decision in Sportelli has been upheld in the Court of
Appeal the appellant accepts that it cannot succeed on this point at this stage. It does, however,
wish to keep the point open in case the pending petition to the House of Lords in Sportelli is
successful and the decision of the Court of Appeal on this issue is overturned.
The porter’s flat
57.       The LVT determined the value to be attributed to the Porter’s flat at £50,000.
On this appeal counsel for the appellant submitted that the appropriate figure was
£300,000. Counsel for the respondent sought to uphold the figure fixed by the LVT
(on the basis that the porter’s flat could not be sold off) but put forward alternative
figures of £100,000 and £150,000. The parties were agreed that the appropriate value
for the flat, if it could be sold on a long lease, would be £300,000.
16
58.    The basis of the LVT’s decision was that the terms of the various leases of the flats at the
appeal property did not permit the charging by way of part of the service charge of any
notional rent for the porter’s flat. It seems to have been on the assumption that the landlord
could not sell the porter’s flat on a long lease but was obliged to provide on site
accommodation for the porter. It appears that, although the existence of different types of long
lease was referred to, only one type of lease was produced as a sample before the LVT. There
were at any rate three different versions of the long leases.
59.    Mr Munro attacked this decision on two fronts. Firstly, the appellant was entitled pursuant
to the terms of the flat leases to charge a notional rent to the service charge account and a notional
rent has been and was in fact at the time of the hearing before the LVT being charged to the service
charge account. He submitted that the notional rent when capitalised justified a capital value of
£300,000. Alternatively, the porter's flat had a capital value of £300,000 because there was no
obligation on the part of the respondent to provide a resident porter. The flat could be sold and the
sale would not affect the value of the other flats in the appeal property. Therefore, it was said, a
willing vendor of the reversionary interest would require, and a willing purchaser would pay, the
value of the porter's flat as part of the consideration for the reversionary interest.
60.    Mr Letman submitted that a willing buyer would pay only a limited speculative value of
£50,000 for the flat in view of the uncertainty of being able to dispose of it, and the inevitable
challenge from lessees to the lessor claiming a notional rent in respect of the flat. The disposal
of the porter’s flat would, it was submitted, be contrary to the terms of the first tranche of leases,
the “old leases”. Further there was no provision within the leases to recover the costs of
porter’s accommodation off site. This issue was currently to be contested before another LVT
under the Landlord and Tenant Act 1985 and would offset the value of the flat if it could be
sold.
The notional rent issue
61.    By clause 2(2) of the old leases the lessee covenants to pay “a proportionate part of the
expenses and outgoings incurred by the Lessor in … the provision of services [in the said
Building] and the other heads of expenditure as the same are set out in the Fourth Schedule
hereto.“ The Fourth Schedule of the old leases is headed “Lessor's Expenses and Outgoings
and Other Heads of Expenditure, in respect of which the Lessee is to pay a proportionate part by
way of Service Charge”. Paragraph 5 of that schedule is in these terms: "The cost of employing
maintaining and providing accommodation in the Building for a porter or porters (including the
provision of uniforms and boiler suits)".
62.    The second and third tranches of leases contain a covenant by the lessee to pay “the
Second Rent” which is defined as meaning “the Service Charge and the Interim Charge as
defined in the Sixth Schedule hereto”. By the Sixth Schedule the Service Charge is defined to
mean a proportion of the “Total Expenditure” which includes “(c) an annual sum equivalent to
the fair rent of any accommodation owned by the Lessors and provided by them rent free to
any of the persons referred to in clause 5(5)(f)”. Such persons include “caretakers porters
maintenance staff gardeners cleaners…”
17
63.    The terms of clause 5(5)(f) are as follows: “ For the purpose of performing the
convenants on the part of the Lessor herein contained at its discretion to employ on such terms
and conditions as the Lessor shall think fit one or more caretakers porters maintenance staff
gardeners cleaners or such other persons as the Lessor may from time to time in its absolute
discretion consider necessary and in particular to provide accommodation either in the
Building or elsewhere (free from payment of rents or rates by the occupier) and any other
services considered necessary by the Lessor for them whilst in the employ of the Lessor.”
64.    The fourth tranche of leases includes covenants and definitions in the same terms (so far
as relevant) as the second and third tranches (clause 5(5)(f) had become clause 6(5)(f) in this
version).
65.    In our judgment the later tranche leases contain clear provisions which entitle the Lessor
to recover a notional rent for the porter’s flat as part of the service charge. The clear words of
the schedules entitle the Lessor to recover a notional rent in respect of accommodation
provided free for the porters, whether that accommodation is in the Building or elsewhere.
66.    The position in relation to the first tranche leases is less clear. The question turns on
whether “the cost of … providing accommodation in the Building for a porter or porters”
includes, in its particular context, the loss of income from allowing a porter to occupy the
porter’s flat rent free. It is clear that the words do not include a notional rent for the provision
of accommodation elsewhere than in the Building.
67.    There have been other cases in which a similar problem has arisen. The law seems to us
to be well summarized in the head note to Earl Cadogan and Another v 27/29 Sloane Gardens
Ltd and Another[2006] 2EGLR 89, a decision of His Honour Michael Rich QC sitting in the
Lands Tribunal: “It is for the landlord to show that a reasonable tenant would perceive that the
underlease obliged it to make the payment sought; such a conclusion must emerge clearly and
plainly from the words used. If the words used could reasonably be read as providing for some
other circumstance, the landlord will fail to discharge the onus upon it. This would not permit
the rejection of the natural meaning of the words in their context on the basis of some fanciful
meaning or purpose, and the context may justify a “liberal” meaning. If consideration of the
clause gives rise to an ambiguity, the will be resolved against the landlord as “proferror”.
68.    Thus in Agavil Investments v Corner and Others (1975) 3 October, unreported, CA., the
Court held that the words “The costs charges and expenses incurred by the Lessor in carrying
out its obligations under Clause 3 of this Lease” (which required the provision of a caretaker)
entitled the landlord to recover payments in respect of a notional rent for the caretaker’s flat.
Cairns L J said “When I come to construe this lease, on the face of it, it does seem to me that
the loss to the landlords by giving up this flat for the occupation of a caretaker, and therefore
being unable to let the flat to a tenant falls reasonably within the words in paragraph 1 of the
Schedule ‘costs or expenses incurred by them in carrying out their obligations’ under Clause 3
(b) (v) of the lease.” But in Gilje and Others v Charlgrove Securities Ltd [2002] 1 EGLR 41
the Court of Appeal held that a notional rent foregone by the landlord in respect of the flat
occupied by the resident caretaker could not be recovered. It could not be described as “monies
18
expended” so as to be recoverable under the tenant’s obligation to pay a percentage of “all
monies expended by the lessor in carrying out all or any of the works and providing the
services and management and administration called for under clause 5(4)” (which included
providing a resident caretaker or porter). “I do not consider that a reasonable tenant or
prospective tenant, reading the underlease that was proferred to him, would perceive that [the
paragraph] obliged him to contribute to the notional cost to the landlord of providing the
caretaker’s flat” was how Laws LJ put it at para 28.
69.    In the present case the obligation on the lessee under clause 2(2) is “To pay to the Lessor
without any deduction a proportionate part of the expenses and outgoings incurred by the Lessor in
the repair maintenance renewal and insurance of the said Building and the provision of services
therein and the other heads of expenditure as the same are set out in the Fourth Schedule.” It is
difficult properly to describe the loss of a notional rent as either an “expense” or an “outgoing”
or as being a “head of expenditure”. The words in paragraph 5 of the Fourth Schedule “The
cost of … providing accommodation” do not alter the meaning of the governing words. There
are actual costs involved in the provision of the porter’s flat which are properly chargeable
under this head, such as repairs and water rates, but in its context it does not seem to us that
the notional rent foregone can properly be said to fall within the words of the leases. In our
view a reasonable tenant or prospective tenant would not consider that clause 2 (2) of the lease
obliged him to contribute to the notional cost of the landlord providing the caretaker’s flat.
Applying the law as summarized by His Honour Michael Rich QC in 27/29 Sloane Gardens
and by parity of reasoning with the Gilje case nothing is recoverable for the loss of notional
rent in respect of the old leases.
70.    It follows that whilst the lessor is entitled to recover notional rent in respect of the
porter’s flat under the second and third tranches of the lease, no notional rent is recoverable
under the old leases.
Sale of the porter’s flat
71.      The respondent submits that disposal was obviously prohibited by the terms of the old
leases. The factual matrix against which the leases were to be construed included the fact that
there has always been a resident porter. He referred to clause 2(2)(e) (which excludes the
porter’s flat when ascertaining the total rateable value of all the flats for service charge
purposes), clause 6(6) by which the lessor covenants to maintain the services of a porter or
porters and paragraph 5 of the Fourth Schedule which includes the cost of “maintaining and
providing accommodation in the Building for a porter or porters” among the service charge
items as demonstrating that there was an obligation to provide a resident porter or porters.
72.    In our view this submission fails. The obligation on the lessor is to “use its best
endeavours to maintain the services of a porter or porters”, not “resident porter or porters”.
Whilst historically there may have been a resident porter and whilst there might be provision
for recovering the cost of providing accommodation in the Building for the porter, it does not
follow that the lessor has to discharge its obligations by providing a resident porter. It is open
19
to the the lessor to discharge its obligations as to portering services by non-resident porters,
and to sell the porter’s flat.
Porter’s flat - valuation
73.    Mr Maunder Taylor, giving evidence on behalf of the respondent, described the porter’s
flat as one of the least attractive flats. Mr Radford for the appellant was less pessimistic about
the flat. He pointed out its attractive distant views. Despite this difference in view they had
agreed a value of £300,000 for the flat.
74.     The appellant submitted that it was this £300,000 which should be incorporated into the
valuation to take account of the flat. The figure was justified as (1) the price which could be
achieved on a sale or (2) its value in rental terms: £16,380 is the notional rent currently charged
for service charge purposes and Mr Radford gave evidence that another flat in the block was
recently let at £15,600 a year. Whether the lessor retained the flat as a porter’s flat and recovered
a notional rent for it or let it in the open market, its rental value justified a figure of £300,000. In
Mr Radford’s view any attempt to reduce that figure because the flat was being sold as part of a
larger packet would be resisted by a seller in the open market. The sale of the flat would not
depress the value of the other flats.
75.     Mr Maunder Taylor took a different view. In his view the willing buyer in the market
place would not value the flat at its price as a stand alone investment, but as a small part of a
larger investment and as such would not add £300,000 to the offer price for the value of the
flat. There would be the uncertainty arising from the possibility of an attempt to challenge the
right to sell and if the flat were sold there would be the difficulty that the lessor would have to
find outside accommodation for a porter the cost of which could not be recovered as part of the
service charge. With it would come the risks and responsibilities associated with employing a
porter. Costs recoverable through the service charge under the terms of the lease were limited
to the extent that they were recoverable and reasonably incurred. It was not viable to sell off
the flat. In his opinion the willing buyer in the market place would see the income as both
speculative, with no provision for a notional rent, and with onerous responsibilities relating to
employment risks. Insofar as the income would have to be recovered as part of the service
charge, there was the added problem that there was, in effect, not just one tenant from whom
rent had to be recovered but a considerable number with an increased chance of default. In Mr
Maunder Taylor's opinion (given that the sale of the flat was not forbidden by the terms of the
leases), the willing buyer in the market place would pay ten times the certified rental income in
2004, and on this basis the porter's flat had a value of £150,000. On the basis that some but not
all of the lessees could be charged for the notional rent whilst the flat was retained as a porter’s
flat, he would attribute £100,000 to the flat.
76.    In our view the value put on the flat by the appellant is over-optimistic. The sale of the
flat or its reduction into possession so as to let it would create other problems in relation to the
provision of portering services. It is unlikely that any purchaser would regard the flat as a stand
alone investment for which he would be prepared to pay the full open market price as if it were
a one-off retail sale. In addition, were the flat retained as a porter’s flat, there would be a
20
shortfall on the notional rent because of the terms of the old leases. As against that, the figures
proposed by Mr Maunder-Taylor seem to us to be too low. Even allowing for the “bulk
discount” point and the difficulty created by the terms of the old leases as to recovering the
notional rent, we take the view that a purchaser would attribute a greater value than £150,000
to the flat. In our judgment the appropriate figure is one of £200,000. If we are wrong in
concluding that the sale of the porter’s flat is not prohibited, our opinion as to the value which
a purchaser would attribute to the right to receive a notional rent under the more recent
leases— amounting, we understand, to some two - thirds of the total – would be £100,000.
Conclusion
77.    The experts agreed that, assuming a valuation date of 21 January 2005 and a deferment
rate of 5.0%, the value of all flats except Nos. 17 and 70 and the porter’s flat was £2,053,255.
The appeal succeeds. We determine the price payable by the appellant for the freehold interest
in the appeal property, including the agreed value of the intermediate landlords’ interests in
flats 17 and 70, is £2,835,255 (£2,053,255 plus £200,000 plus £582,000).
78.    We would add that if, contrary to the conclusion we have reached, the correct valuation
date is 31 January 2006, the experts agreed that the valuation should be increased by £48,266.
Dated 10 January 2008
His Honour Judge Reid QC
N. J. Rose FRICS
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