Properties AY&U Limited v Barham House Freehold Limited

An auction price shortly before a valuation date is evidence of open-market value, but it does not set a legally binding minimum valuation. Valuation is a question of fact and judgment. A tribunal may prefer expert evidence showing that an auction result was speculative or unrepresentative.

Reasons are sufficient if they enable the parties to understand why one expert’s valuation was preferred. On a review appeal, the Upper Tribunal will not substitute its own valuation where the First-tier Tribunal has accepted expert evidence and made no identifiable error of approach.

The leaseholders’ nominee exercised the collective-enfranchisement right under Leasehold Reform, Housing and Urban Development Act 1993. The First-tier Tribunal determined the premium for the freehold of Barham House at £30,000. That figure comprised agreed reversionary value, speculative development value and appurtenant-property value.

The freeholder had bought the property at auction for £91,000 four months before the valuation date. Its expert sought a substantially higher valuation based on prospective basement and roof development, but the First-tier Tribunal rejected that approach. Permission to appeal was confined to whether the First-tier Tribunal had adequately explained why it did not treat the auction price as a reliable indicator of market value.

1. Appeal dismissed. The First-tier Tribunal gave adequate reasons for accepting the respondent’s expert evidence and assessing the premium at £30,000.

2. The principles concerning reasons in Flannery v The Halifax Estate Agents Limited [2000] 1 WLR 377 required an explanation sufficient to show why the competing expert case was rejected. The First-tier Tribunal had identified the defects in the residual valuation: uncertain planning permission, uncertain basement conditions, inadequate evidence of economic viability, and practical obstacles to development. Its conclusion that the opportunity was highly speculative adequately explained its preference for the alternative valuation.

3. The absence of a separate detailed discussion of the auction price did not make the decision deficient. The appellant’s own expert had not treated the price as relevant and had not explained why the appellant paid it. The accepted evidence explained why the price was excessive and unlikely to be repeated.

4. Open-market value on a valuation date is a question of fact and valuation judgment, not a rule of law. A recent auction sale is recognised evidence of market value, but it need not prevail over competing evidence in every case. The First-tier Tribunal was entitled to find that the auction bidders had taken an expensive speculative risk and that the price did not represent the value payable on enfranchisement.

5. On a review appeal, where the First-tier Tribunal has heard competing experts and accepted one valuation, the Upper Tribunal will rarely interfere unless the accepted approach contains an identifiable and material error. No such error was shown, so there was no basis to substitute a different valuation.

• Upper Tribunal (Lands Chamber): dismissed the freeholder’s appeal in [2022] UKUT 231 (LC).
• First-tier Tribunal (Property Chamber): by a decision issued on 10 December 2021, determined the collective-enfranchisement premium at £30,000.