Daejan Investments Limited v Nigel Collins & Anor

Where reliable, near-contemporaneous transactional evidence exists for the subject short lease, its value without statutory lease-extension rights should ordinarily be obtained by deducting the value of those rights from the date-adjusted sale price. Relativity is then a cross-check, not a substitute for market evidence.

The value of precarious parking permission is modest because it is neither an easement nor assured to continue. In valuing lease-extension premiums under Leasehold Reform, Housing and Urban Development Act 1993, adjustments to comparables must be supported and consistently applied. A consistent interpolation of prior Tribunal determinations may be used to value Act rights where no market for leases without those rights exists.

The competent landlord appealed, and the tenants cross-appealed, from the First-tier Tribunal’s valuation of the premium payable for a statutory 90-year extension of the lease of a flat at Ashley Gardens, London. The Upper Tribunal directed a re-hearing.

The parties agreed much of the statutory valuation framework but disputed the freehold value with vacant possession, suitable comparable transactions, time and physical adjustments, the value of a precarious parking arrangement, the effect of an altered kitchen and additional WC, the value of Act rights, and relativity. The central issue was the premium payable under Schedule 13 to the Leasehold Reform, Housing and Urban Development Act 1993.

1. The Tribunal determined the re-hearing by assessing a premium of £208,109. It resolved the parties’ appeal and cross-appeal issues by substituting its own valuation findings.

2. The appropriate freehold value with vacant possession was £1,322,500, derived from £940 per square foot. Sales before the valuation date were the evidence available to the hypothetical purchaser. Later sales had some utility, but were unnecessary where there was sufficient earlier evidence. The Tribunal excluded comparables that were materially too large or post-dated the valuation date, preferred the transaction-based Westminster UK House Price Index, and gave slightly greater weight to the closest and most contemporaneous comparables.

3. The parking arrangement was a precarious permission rather than a proprietary right. The covenant against parking did not reduce its value, since permit-holders could park with the landlord’s permission. But the arrangement could be withdrawn or charged for. Its value was therefore £5,000, not the landlord’s proposed £30,000.

4. The altered layout was probably made by a tenant, but it neither increased nor reduced the flat’s value. Accordingly, the tenant-improvement disregard in paragraph 4A(1)(c) of Schedule 13 to the Leasehold Reform, Housing and Urban Development Act 1993 had no valuation consequence.

5. There was no market for leases without Act rights. The Tribunal adopted a 5.85% deduction by interpolating between prior determinations for comparable unexpired terms, an approach it commended for future use.

6. The date-adjusted sale price of the subject flat was reliable market evidence. Deducting 5.85% for Act rights produced an existing-lease value of £989,500 and a relativity of 74.8%. Relativity graphs were used only as a cross-check; repeated averaging of market evidence and graphs was not a reliable valuation method on these facts.

• Upper Tribunal (Lands Chamber): on a re-hearing of the appeal and cross-appeal from the First-tier Tribunal (Property Chamber), determined the statutory premium at £208,109.
• First-tier Tribunal (Property Chamber): determined the price payable for the extended lease. Its reference was LON/00BK/OLR/2022/0535; no reported or neutral citation is stated.