Fleur Marie Alberti v Cadogan Holdings Limited

For the statutory valuation of a house under section 9(1A)(d) of the Leasehold Reform Act 1967, the tribunal must compare the value of the property as it stands with its value if the tenant’s improvements had not been made. The fiction is limited to the improvements, but it must be given full effect, including inevitable consequences. Where improvements enabled a building to be occupied as a single house, the valuation must assume that the relevant planning status arising from that occupation did not exist. The reality principle preserves the real-world position except so far as the statutory hypothesis requires otherwise.

The applicant sought to acquire the freehold of 10 Cheyne Walk under the Leasehold Reform Act 1967. The property had originally been divided into five flats. The tenant later removed partitions, redundant fittings and other features so that it could be occupied as a single house, and carried out further works including a studio extension.

The parties agreed that the works were tenant’s improvements within section 9(1A)(d). The preliminary issue was whether the valuation of the unimproved property should retain the actual lawful planning status permitting use as a single house, or should assume that such use would have required planning permission which would not have been granted at the valuation date.

1. Preliminary issue determined for the applicant. Section 9(1A)(d) of the Leasehold Reform Act 1967 required the tribunal to assume that use of the property as a single house would have been unlawful as a matter of planning control on the valuation date.
2. The statutory direction involved a comparison between the value of the house as it stood and the value it would have had if the relevant improvement had not been made. The hypothetical property retained all real features except the improvement. The house’s history therefore had to be rewritten to the extent necessary to treat the conversion works as if they had never occurred.
3. The reality principle required the valuer to depart from reality no further than the statutory hypothesis compelled, while giving full effect to inevitable consequences. It did not justify retaining a planning status which was itself the direct consequence of the tenant’s improvements.
4. The inevitable consequence of assuming that the conversion works had never been carried out was that occupation between the works and the valuation date had also occurred in the unimproved condition. A purchaser would therefore not have been advised that the building, though divided into five flats, had an established lawful use as a single house.
5. Fattal v Keepers and Governors of the Free Grammar School of John Lyon was distinguishable. There, the planning permission pre-dated and was not caused by the improvements. Here, the planning status permitting single-house occupation was a direct consequence of the improvements.

The judgment determined a preliminary issue transferred from the First-tier Tribunal with the parties’ consent. No lower tribunal decision on the issue was stated.