Trustees of The Barry and Peggy High Foundation v Zucconi & Anor (LEASEHOLD ENFRANCHISEMENT - Flat - Premium)

Factual and Procedural Background

This appeal arises from a decision of the First-tier Tribunal (Property Chamber) (FTT) dated 18 September 2018 concerning the valuation of the relativity of an existing leasehold interest in a two-bedroom first floor flat located at 26 Barrydene, Oakleigh Road North, Whetstone, London, N20 9HG. The leasehold interest had 52.56 years unexpired as of 29 November 2017. The appellants, the freeholders, are the Trustees of Company A. The respondents, the lessees, hold the leasehold interest granted in 1971 for a term of 99 years. The FTT determined the freehold vacant possession (FHVP) value at £558,586, which was not challenged on appeal. The dispute centered on the appropriate relativity percentage to apply, which affects the lease value and the premium payable.

The FTT initially refused permission to appeal, but the Upper Tribunal granted permission on 23 January 2019 following written representations from counsel for both parties. The appeal challenges the FTT's choice of valuation methodology regarding the use of various published relativity graphs.

Legal Issues Presented

1. Whether the First-tier Tribunal was correct to rely on an average of five RICS relativity graphs from outside prime central London rather than considering updated Savills and Gerald Eve prime central London graphs.
2. Whether the FTT erred in excluding Savills 2016 enfranchiseable graph and Gerald Eve 2016 graphs from its valuation approach.
3. Whether the FTT correctly applied valuation principles concerning deductions for statutory rights under the Leasehold Reform Act 1993.

Arguments of the Parties

Appellant's Arguments

• The FTT was wrong to rely on an average of five RICS graphs from 2009, which were considered unreliable due to reliance on opinion evidence and historic data.
• The appellants argued that the Savills 2016 enfranchiseable graph, with a deduction for Act rights (6%), should have been used, as endorsed by the Upper Tribunal in a recent case concerning a similar location.
• The five RICS graphs used by the FTT reflected higher relativity figures than recent Tribunal decisions, which have shown a diminution in relativity over time.
• The FTT failed to consider relevant and more recent evidence, specifically the Savills and Gerald Eve graphs, and thereby took account of irrelevant considerations.
• The approach adopted by the FTT was inconsistent with the Tribunal's decision in Reiss v Ironhawk Limited, which preferred the Savills 2016 enfranchiseable graph outside prime central London.

Respondent's Arguments

• There is no single correct method to determine relativity; multiple approaches are appropriate depending on available evidence.
• The FTT properly excluded the CEM and LEASE graphs, which have been criticised in prior cases, and correctly averaged the five relevant RICS graphs outside prime central London.
• Gerald Eve and Savills graphs are based on prime central London data and thus not relevant to the subject property’s location.
• The experts did not agree on an appropriate deduction for Act rights, making it inappropriate to adopt the approach in Reiss, which involved different evidence and agreement on deductions.
• The FTT’s valuation approach was sound and supported by the evidence before it, and therefore not wrong.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Re Sinclair Gardens Investments (Kensington) Limited's Appeal [2017] UKUT 494 (LC)	Use of deductions for Act rights when valuing leasehold interests.	Referenced as authority for deducting 6% for no Act rights from enfranchiseable graph values.
Reiss v Ironhawk Limited [2018] UKUT 311 (LC)	Preferred use of Savills 2016 enfranchiseable graph outside prime central London and appropriate deduction for Act rights.	Held to be a relevant and recent case supporting appellant’s valuation approach; criticized FTT for not applying it.
Mallory v Orchidbase Limited [2016] UKUT 468 (LC)	Demonstrated lower relativity figures determined by Tribunal compared to older graphs.	Used to illustrate that historic graphs may overstate relativity.
Kosta v Trustees of the Phillimore Estate [2014] UKUT 319 (LC)	Use of average of prime central London RICS graphs for determining relativity.	Supported the approach of averaging graphs, which influenced FTT’s methodology.
Roberts and Thain v Fernandez [2015] UKUT 106 (LC)	Recognition that RICS graphs, despite deficiencies, provide evidence of value.	Supported FTT’s use of multiple RICS graphs for valuation.
Xue v Cherry [2015] UKUT 651 (LC)	Use of weighted averages of different graphs including prime central London data for properties outside that area.	Illustrated that prime central London graphs can be used outside that area.
Contactreal v Smith [2017] UKUT 178 (LC)	Criticism of certain published research graphs (CEM and LEASE).	Supported exclusion of CEM and LEASE graphs from valuation.
Re Elmbirch Properties Plc's Appeal [2017] UKUT 314 (LC)	Criticism of CEM and LEASE research graphs.	Supported FTT’s exclusion of those graphs.
Re Midland Freeholds Limited's and Speedwell Estates Limited's Appeals [2017] UKUT 463 (LC)	Use of Savills 2015/2016 graphs for properties outside prime central London.	Supported appropriateness of Savills graphs outside prime central London, contrary to FTT’s exclusion.
Trustees of the Sloane Stanley Estate v Mundy [2016] UKUT 223 (LC)	Two valuation methods when no reliable transaction evidence: use most reliable unenfranchiseable graph or enfranchiseable graph with deduction for Act rights.	Framework for valuation methods applied by Upper Tribunal in this case.

Court's Reasoning and Analysis

The Upper Tribunal considered the FTT’s reliance on an average of five RICS relativity graphs from 2009, which excluded the Gerald Eve and Savills graphs on the basis that the property was outside prime central London. The Tribunal noted that while the FTT correctly excluded the CEM and LEASE research graphs due to their deficiencies, it erred in excluding the more recent and relevant Gerald Eve and Savills graphs solely based on geographic data origin.

The Tribunal reasoned that prime central London graphs can be relevant outside that area, citing prior cases where such graphs were used effectively. It observed that the RICS graphs are dated and that more recent graphs from Savills and Gerald Eve provide updated and reliable data. The Tribunal also emphasized that the FTT failed to consider recent authoritative cases, particularly Reiss, which preferred the Savills 2016 enfranchiseable graph with a deduction for statutory rights in a similar location.

Applying the principles from Mundy, the Tribunal recognized two accepted valuation approaches when no reliable transaction evidence exists: using the most reliable unenfranchiseable graph or using an enfranchiseable graph with a deduction for Act rights. The FTT’s failure to consider these approaches and the relevant graphs was a legal error.

Consequently, the Tribunal preferred the appellants’ expert’s valuation approach, adopting a relativity of 74.8%, which incorporates a deduction for Act rights and reflects a balanced position between the older graphs and the FTT’s averaging method. The Tribunal declined to remit the issue back to the FTT, instead determining the relativity and the premium payable directly.

Holding and Implications

The appeal is ALLOWED.

The Upper Tribunal held that the First-tier Tribunal erred by excluding the Savills and Gerald Eve graphs from its valuation consideration solely because the property was outside prime central London. The Tribunal determined the appropriate relativity to be 74.8%, resulting in a premium payable of £89,428.

The decision directly affects the parties by adjusting the relativity and premium payable in the leasehold enfranchisement valuation. No new precedent was established beyond reaffirming the applicability of more recent graphs and valuation principles in similar contexts.