Home Information Cases Fattal v Keepers & Governors Of The Possessions Revenues & Goods Of The Free Grammar School (2004)

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Fattal v Keepers & Governors Of The Possessions Revenues & Goods Of The Free Grammar School (2004)

Summary

The assumption in the Leasehold Reform Act 1967 s.9(1A)(d) that the price for enfranchising a freehold was to be diminished by the extent to which the value of the house had been increased by tenant's improvements did not require the value of the potential for improvement to be excluded from the valuation of the unimproved house.

Facts

The appellant tenants (F) appealed against a decision determining the price they had to pay to acquire from the respondent landlord (J) the freehold of the property in which they lived. F were tenants of the property. When the leases were granted the property was a four-bedroom house with no bathroom or garage and only basic services. After F carried out extensive works, the property had seven bedrooms and seven bathrooms, a swimming pool complex and two garages. F had served notice to acquire the freehold from J under the Leasehold Reform Act 1967. The Lands Tribunal had determined the price to be paid but, pursuant to the Lands Tribunal Rules 1996 r.50(4), it had further ascertained and stated in its decision lower alternative amounts that it would have determined if it had come to a different decision on points of law put forward by F in relation to valuation under s.9(1A)(d) of the 1967 act. F submitted that (1) development potential including, in particular, the value of any planning permission was to be left out of account in valuing the property; (2) the value of the property should be assessed by taking its improved value and then deducting the value of tenant's improvements; (3) if the property was valued on the basis that the improvements had never been carried out then the planning permissions that enabled them to be carried out should also be disregarded.

Held

(1) The assumption in s.9(1A)(d), that the price was to be diminished by the extent to which the value of the house and premises had been increased by any improvement carried out by the tenant or his predecessors in title at their own expense, did not imply that the value of the potential for improvement had to be excluded from the valuation of the unimproved house. Assumption (d) required a calculation of the amount of the increase in value caused by the improvements. That necessarily involved a valuation of the property as it would have been on the valuation date if it had not been improved. Any potential for improvement would be included in the achieved sale prices of unimproved properties so that a valuation of an unimproved house and premises would include the value of any such potential. It followed that an increase in value caused by an actual improvement had to be calculated as an excess over the unimproved valuation including the value of the potential for improvement, notwithstanding that the potential was merged in or absorbed by the actual improvement. Section 9(1A)(d) did not credit the tenant with the value of the relevant improvements, but only with the increase in value they had caused. (2) Section 9(1A)(d) did not restrict the valuer in his analysis to a "top down" basis of valuation, as F contended, thus preventing him from considering unimproved comparables. Assumption (d) simply required that the price be diminished by the extent stated. It did not impose any requirement that the house and premises should be valued either from the top down or from the bottom up. The method adopted was a matter of valuation, not of law. The method adopted of valuing the property as if it had never been improved at all was the standard method adopted by the Lands Tribunal. (3) Assuming that the issue of the planning permissions was a separate point from the first point, F's submission was rejected. An improvement was a physical concept, John Lyon's Charity v Shalson (2003) UKHL 32 , (2004) 1 AC 802 applied. It was the increase in value caused by the physical works that had to be subtracted and the existence or availability of planning permission was not part of those works.

Appeal dismissed.

Court of Appeal
Buxton LJ, Sedley LJ, Sir Martin Nourse
Judgment date
30 October 2004
References

​[2005] 1 WLR 803, [2005] 1 All ER 466, [2004] 50 EG 85 (CS)