The UK Upper Tribunal (Land Chamber) considered the issue of future development value payable to the outgoing freeholder in a claim for the acquisition of the freehold by the leaseholders in a collective enfranchisement claim.
House Of Mayfair Ltd v Aitchison & Ors [2021] UKUT 73 (LC) (23 March 2021) came down to the value payable for potential roof development of the building. The leaseholders in the block exercised their right to claim the freehold under the Leasehold Reform, Housing and Urban Development Act 1993, but the parties could not agree on the "hope value" element of the premium payable for the possibility of a roof development.
The freeholder argued that a new flat could be built on the roof of the building; however there was no existing access to the roof without going through the top floor flat. The freeholder sought to establish that the top floor flat would be highly motivated to allow such development as that leaseholder and the freeholder were in effect the same person, the leaseholder of that top floor flat being the sole director and shareholder of the freehold company. This would mean any prospective purchaser of the freehold would have to acquire two interests in order to realise the development potential on the roof, the freehold and the top floor flat (or part thereof for access).
The Upper Tribunal determined that this route of value could not be an assumption; it was a question of fact specific to the building in question. In this case the Upper Tribunal considered there was no evidence that the freeholder had taken any steps in seven years of ownership to realise additional development value by altering the top floor flat or otherwise, to progress a development scheme. The development value payable by the leaseholders was therefore significantly limited.
Should a freeholder want to obtain development value, it is clear that it will need to be obtainable for the building and steps need to have been taken towards a scheme.
If you would like further information or advice about enfranchisement in general please contact enfranchisement specialist, William Bethune.