This is a summary of a Birmingham Lease Extension decision by the Leasehold Valuation Tribunal where it was ordered that the leasehold owner was entitled to a lease extension upon the terms to be decided by the Leasehold Valuation Tribunal for determination of those terms including the amounts referred to in section 51(5) of the Act.
The relevant provision of Section 51 (5) refers to the premium which is payable under Schedule 13 of the Act in respect of the grant of the new lease.
Birmingham Lease Extension Property Details
The decision relates to a lease extension for a Birmingham property known as Flat 3, 44 Stourbridge Road, Bromsgrove, Birmingham, B61 OAH is held under a long lease dated 30 September 1970, for a term of 99 years from 25 December 1969, at an annual rent of £18 per annum fixed throughout the term.
The Terms of the New Lease being subject to the lease extension
The Tribunal decided that the new lease shall be a 90 year lease extension of the current lease, at a peppercorn rent, but otherwise on the same terms as the existing lease.
Valuation for this Birmingam Lease Extension
The Court held that the Leasehold Valuation Tribunal's lease extension valuation was based upon the correct valuation date is 20 November 2007, the date of the application to the court. Therefore the unexpired term to be used for the valuation is 61 years.
Guidance as to the relevant Capitalisation Rate is given in the case of Nicholson and Others v Goff (2007) LRA/29/2006, where the Lands Tribunal stated:- "Factors relevant to the capitalisation -- the length of the lease term, the security of recovery, the size of the ground rent (a larger ground rent being more attractive), whether there were provisions for review of the ground rent and, if there was such provision, the nature of it".
In this Birmingham Lease Extension case, the rent is small and is not subject to increase. The Tribunal finds, --therefore that a capitalisation rate of 6. 5%, rather than the 5% used in the Applicant's valuation document, was right.
The value of the then current lease - the Tribunal, as an expert Tribunal using its knowledge of property prices in the Birmingham, found that this amounts to £100, 000 as of November 2007.
The Deferment Rate - followed the Lands Tribunal Decision in Earl Cadogan and Cadogan Estates Limited (1) and Michele Francesca Sportelli and Lara- Lyn Victoria Lamont Sportelli (2) LRA/50/2005 EWCA Civ 1042, the Tribunal applies a Deferment Rate of 5 per cent. The Birmingham LVT therefore, found that the premium payable by the leasehold owner in respect of the lease extension was £7, 672.