John Lyons Charity v Shalson

Where a statutory valuation provision supports materially different methods of calculating a deduction for tenant-funded improvements, the issue may properly be treated as arguable rather than resolved by the wording alone. Section 9(1A)(d) of the Leasehold Reform Act 1967 did not clearly determine whether the deduction was confined to value exceeding the property’s original-condition value or could extend to value attributable to improvements within its present-condition value. The issue was of general importance and permission to appeal was granted.

The tenant sought permission to appeal from the Lands Tribunal on the construction of section 9(1A)(d) of the Leasehold Reform Act 1967. The property had first been converted into flats and later reconverted into a house, increasing its value. The tenant argued that the reconversion was an improvement and that the resulting increase should be deducted from the freehold price.

The Lands Tribunal adopted an approach based on comparing the property’s original-condition value with its present-condition value. The tenant proposed deducting any value attributable to tenant-funded improvements from the present-condition value. The central issue was which valuation approach the statute required.

The Court of Appeal granted permission to appeal from the Lands Tribunal. Costs were ordered to be costs in the appeal. The merits of the statutory construction issue were not finally determined.

1. Statutory wording. Section 9(1A)(d) of the Leasehold Reform Act 1967 provides for the price of a house and premises to be reduced by the extent to which their value has been increased by an improvement carried out by the tenant or predecessors in title at their own expense. Schiemann LJ considered that the statutory language provided no clear answer to the competing constructions.
2. Lands Tribunal approach. The Tribunal’s method was to establish the value in the property’s original condition, establish its present-condition value, identify any excess, and deduct from that excess the part attributable to tenant-funded improvements.
3. Tenant’s proposed approach. The tenant’s method was to establish the present-condition value, identify the value attributable to tenant-funded improvements, and deduct that figure from the present-condition value.
4. Permission. The issue was of general importance and was likely to affect many valuations. The court was told that there was no authority on the point. Schiemann LJ therefore granted permission, and Mance LJ agreed that an appeal should proceed. The court did not decide whether the reconversion was an improvement or which valuation method was correct.

• Court of Appeal (Civil Division): In [2001] EWCA Civ 1451, permission to appeal from the Lands Tribunal was granted. The court left the substantive construction issue for the appeal and ordered that costs be costs in the appeal.
• Lands Tribunal: Adopted a valuation method based on comparison between the property’s original-condition value and present-condition value.