Cadogan & Anor v Sportelli & Anor

In statutory valuations for collective enfranchisement or lease extensions, hope value cannot be added separately to the landlord’s share of marriage value. Hope value anticipates future marriage value, so its separate inclusion would involve double counting.

A specialist valuation tribunal may reject market evidence where it rationally concludes that the actual market differs fundamentally from the statutorily assumed market. It may issue factual valuation guidelines to promote consistency. Guidelines for prime central London should generally be followed absent compelling contrary evidence, while their application elsewhere remains open to relevant evidence about local conditions.

These conjoined appeals arose from Lands Tribunal decisions concerning residential leasehold enfranchisement and lease extensions. The Tribunal determined preliminary issues about the treatment of hope value and the deferment rate used to calculate the present value of a landlord’s reversion.

Landlords challenged the exclusion of hope value under the Leasehold Reform, Housing and Urban Development Act 1993. Tenant interests challenged the Tribunal’s rejection of evidence from actual sales when setting standard deferment rates of 4.75% for houses and 5% for flats in prime central London. The court also considered the permissible precedential effect of the Tribunal’s valuation guidance.

1. The appeals and Cadogan’s application for permission to cross-appeal were dismissed unanimously.

2. Hope value was impermissible in valuations under Schedules 6 and 13 to the Leasehold Reform, Housing and Urban Development Act 1993. Hope value represented the anticipation of future marriage value. The statutory scheme separately identified marriage value, fixed the landlord’s share at 50%, and excluded it where the lease exceeded 80 years. Adding hope value would therefore pay the landlord twice for the same element of value.

3. The statutory assumptions excluding the tenant, nominee purchaser and relevant lessees from the market required a purposive construction. The words concerning persons buying or seeking to buy covered their acquisition of any interest from the landlord, whether immediately or in the future. A construction excluding only a bid on the valuation date, while admitting the same bid on the following day, would be absurd.

4. For collective enfranchisement, the 1996 amendment excluding all tenants from the assumed market deliberately removed hope value relating to non-participating tenants. The court could not restore it through interpretation merely because the resulting treatment might appear unfair or anomalous. The same reasoning indicated, obiter, that hope value was also unavailable for higher-value single houses under section 9(1A) of the Leasehold Reform Act 1967.

5. The Tribunal committed no error of law by rejecting actual-market evidence when fixing the deferment rate. Useful market evidence could not lawfully be ignored, but the Tribunal rationally found that transactions in the statutory real-world market were fundamentally different from investments in the hypothetical no-Act market. The latter concerned a secure long-term reversion, whereas actual prices were driven principally by anticipated early enfranchisement and marriage value. Irrationality imposed a high threshold, which was not met.

6. The Lands Tribunal could properly provide valuation guidance to promote consistency and reduce repetitive evidence and expense. Its rates for prime central London should generally be followed unless compelling evidence justified departure. Outside that area, the rates were a starting point rather than a conclusive factual precedent, because relevant local evidence had not been fully tested.

1. Court of Appeal (Civil Division): The conjoined appeals were dismissed by [2007] EWCA Civ 1042 . Cadogan’s outstanding application for permission to cross-appeal was also dismissed.
2. Lands Tribunal: On appeals from several Leasehold Valuation Tribunals, it excluded hope value from collective-enfranchisement and lease-extension valuations, fixed deferment rates of 4.75% for houses and 5% for flats, and issued guidance concerning future application of those rates.
3. Leasehold Valuation Tribunals: The underlying proceedings determined prices for collective enfranchisements, an individual lease extension and enfranchisement of a house.