[2025] UKUT 00324 (LC)

The basic case on behalf of the appellant is that the FTT’s valuation is wrong because it reflects a relativity (the relationship between the value of the short lease and FHVP value) of 81.85%, which is substantially out of step with the 74.37% relativity which the parties agree it would have been appropriate to adopt in the absence of suitable comparable evidence.

Ms Muir acknowledged that the FTT is not bound to follow the relativity endorsed in Zucconi, but cited the words of the Tribunal (Judge Cooke and Mr Mark Higgin FRICS) in Daejan Investments Ltd v Collins [2024] UKUT 26 (LC), at [71]:

“…if the value calculated without the use of graphs is adrift from the value in the tables then something may have gone awry and it may be worth looking again at the adjustments.”

Ms Muir submitted that the very marked divergence from the graphs demonstrated by the FTT’s figure strongly suggested that something had gone awry in the FTT’s determination. The FTT’s relativity was the result of a valuation arrived at after applying a series of subjective valuation adjustments to the transactional evidence, some of them very large indeed, for which there was no underlying market evidence. The resulting premium was only as reliable as those subjective adjustments and where the outcome was so substantially inconsistent with the norm evidenced by the relativity graphs the FTT ought to have questioned the outcome and the individual steps which had led to it. Its failure to do so was an error of valuation approach which justified intervention by this Tribunal.

Ms Muir argued that of the six sales of flats at Hyde Park Mansions analysed by the FTT, the sales of Flats 1F and 1H were clearly the best comparables because they were most similar in size and situation to the Property and therefore required the least adjustment. By contrast Flats 9G, 12F and 4C required adjustment for floor level (all), condition (all) and lack of a lift (12F). Ms Muir submitted that adjustments were also required for size and the number of bedrooms, but neither expert had done this and nor had the FTT. The more adjustments required, the less reliable the comparable. By including the other inappropriate comparables the FTT had arrived at too low a figure and an illogical outcome.

In particular Ms Muir submitted that the FTT erred in considering Flat 12F as a useful comparable. It has five bedrooms, is considerably larger than the Property but has the disadvantage of being on the fourth floor with no lift available. She submitted that the time adjusted price of £745 psf paid for the long lease in January 2024 was less than the price of £813 psf paid for the existing short lease of the Property in February 2024 which supported the view that it was not a good comparable. Even after the FTT’s adjustments (including 20% for the absence of a lift) its assessment of the value of the long lease was £812 psf, no different from the value of the lease of the Property which was 900 years shorter, meaning either the adjustments were wrong or the comparable should have been ignored or given lower weighting.

Ms Muir also criticised the FTT’s reliance on Flat 9G, a five bedroom flat on the second floor which she described as considerably larger than the Property. She noted that the FTT’s adjusted price for the sale of the long lease of Flat 9G (£714 psf) was once again lower than the price paid for the existing lease of the Property and lower than the value determined by the FTT for the existing lease. Therefore, either the tenant had overpaid for a short lease or Flat 9G was not a suitable comparable because it attracted a different market. She submitted that the FTT had erred in saying (at paragraph 21, see [29] above) that this discrepancy could be explained by the market. Flats selling for between £1.2 million and £2.45 million are largely investor owned, as the FTT had commented, and their purchasers would be unlikely to be affected by the housing crisis. Moreover, theopportunity the Act provided to extend a short lease, which the FTT suggested mightmake having a long lease less important, needed (in Ms Muir’s submission) to be ignored in determining the premium payable.

Finally, the FTT had given no weight to uncertainty cast by Mr Sharp on the reliability of the assumed sale price of Flat 4C. Mr Sharp had produced a supplemental report to deal with Flat 4C, which had been introduced by Mr Cooper at a late stage after the experts had exchanged details of the comparables they intended to rely on. In his supplemental report Mr Sharp suggested there was uncertainty over the sale price, which was stated by Mr Cooper to have been £1,457,500, whereas Zoopla and Rightmove recorded a sale price of £1,477,000. Moreover, the lease of Flat 4C had been extended by negotiation in November 2020 on the basis that the value of the long lease was £1,531,300. Adjusted for the passage of time this equated to £1,813,510 by June 2022 when the reported sale took place, casting further doubt on the later transaction. Ms Muir applied Mr Cooper’s adjustments of -11% to Mr Sharp’s time adjusted sale price to demonstrate a price of £1,008/sq ft, in line with Mr Sharp’s view of the value of the extended lease of the Property.