The Trustees of the K&M Wholesale Suppliers Ltd Retirement Benefit Scheme v Meadowhead Christian Fellowship

On an enfranchisement of a place of worship under section 2(e) of the Places of Worship (Enfranchisement) Act 1920, compensation may be assessed by valuing both the ground-rent term and the reversion. The reversion must reflect the estimated full value of the land at the expiry of the lease, rather than the rent reserved.

The assessment must also include any marriage value. Where acquisition unites a tenant’s leasehold interest with the freehold, the increase produced by that union is calculated by comparing the vacant-possession freehold value with the parties’ separate interests, then divided equally. A costs sanction under section 4 of the Land Compensation Act 1961 depends on the facts; a conditional offer is not unconditional, and no universal three-month period applies for service of a particularised claim.

Meadowhead, the trustees of a Christian fellowship occupying a former retail unit under a 99-year lease at a fixed rent of £50, exercised its statutory right to acquire the freehold reversion. The claimants were the freehold owners.

The parties agreed that the statutory qualifying conditions were met and that the freehold value with vacant possession was £110,000. They disputed the appropriate yields for valuing the claimants’ existing term and reversionary interests, whether marriage value formed part of compensation, and costs following the notice to treat.

The Tribunal determined the reference on written representations, later summarily assessing the costs awarded to the claimants.

1. Compensation. The Tribunal determined that Meadowhead must pay £6,839 for the freehold reversion.

2. Section 2(e) of the Places of Worship (Enfranchisement) Act 1920 did not preclude valuation of the ground-rent term. Properly construed, it required that the valuation include a reversion and that the reversion be assessed by reference to the property’s estimated full value at lease expiry, rather than the passing rent.

3. The Tribunal preferred a 6% yield for the fixed ground-rent income and a 12% deferment rate for the reversion. The same yield normally should be used both to capitalise the assumed market rent in perpetuity and to defer the resulting freehold capital value until that rent can be received.

4. The claimants’ current interest was therefore £850. It was necessary also to recognise marriage value. Neither section 2(e) nor rule (3) of section 5 of the Land Compensation Act 1961 required its exclusion. The Tribunal applied the reasoning in Waters v Welsh Development Agency [2004] 1 WLR 1304: a tenant’s bid for the reversion may include the additional value created by uniting the interests.

5. Using a 13% dual-rate yield, with a 2.5% sinking fund and 20% nominal tax, the leasehold interest was £97,173. The combined separate interests were £98,023, leaving marriage value of £11,977. Half, £5,989, was payable to the claimants in addition to their existing interest.

6. Costs. Meadowhead’s without-prejudice, subject-to-contract offer was not an unconditional offer under section 4(1)(a) of the Land Compensation Act 1961. Section 4(1)(b) imposed no fixed three-month deadline; in the circumstances, the claimants had not delayed unreasonably in serving their particularised claim. The claimants were entitled in principle to pre-25 July 2016 costs, but no costs were awarded for later stages under the written-representations procedure. Their recoverable costs were subsequently assessed at £5,797, subject to confirmation of the VAT position.

not stated in the judgment.