A recent FtT case has put the spotlight on objectivity and a breakdown in communication.
To keep the team at myleasehold up to date with whys and the wherefores of the Tribunal world, we regularly download and review the latest decisions. One case that caught our attention is noteworthy not only for the pettiness of the dispute, but also how a lack of objectivity from one side and a breakdown in communication between the parties lead to a ‘slam dunk’ outcome for one.
The case involved a flat in East London with a lease of 66 years unexpired, where all of the components had been agreed, except the long lease value. The Tenant’s valuer was at £325,000 whilst the Landlord’s valuer was at £375,000. In premium terms the (rounded) difference was £6,000 – the tenants proposed £24,000 and the landlord proposed £30,000. So far, so good.
In this case the FtT written determination stretched to only five pages, including the valuation. To our reading the fight was over very quickly, when objectivity kicked in and the Tenant’s valuer moved to resile his position on his long lease value, conceding that it was worth £372,000, £3,000 short of the Landlord’s value.
On the breakdown of communication, when considering the comparable evidence, the Tenant put forward 5 comparables as did the Landlord. However, only one of the comparables were in common. That must have been of as much disappointment and bafflement to the Tribunal as it was to us, the readers.
When it came to the determination, the Tribunal were so unimpressed with both side’s evidence, that they felt compelled to fine-tune the landlord’s valuation, knocking it down from £375,000 to £372,000.
And the outcome of the case was that the determined premium was £28,500. An expensive exercise in anyone’s book.
So, what wisdom can be learnt and how might we avoid falling into the same trap?
The starting point for valuers is to read the RICS guidance notes (Leasehold Reform in England and Wales 3rd Edition August 2015) which can be downloaded for free. Relevant to this scenario, note 6 directs valuers to ‘undertake negotiations and see whether the premium can be agreed’. In other words, we are retained to try and reach a compromise via exploratory dialogue.
That means, in a case such as this, it is our job as advisors to find a resolution, making recourse to a Tribunal redundant. A commitment of this kind should be expected by our clients and is good news for the tax payers who have to fund these Tribunal charades.
Why or how does any professional valuer think failing to agree a basket of comparable sales, in a low value case is in the interest of their client, and how do they reconcile this with their over-riding duty to the Tribunal as an expert witness?
In our experience, for claims on these types of properties, an objective approach to market value from both sides should lead to an agreement, rather than be a matter in dispute. If there is any ambiguity on what is or what is not a piece of comparable evidence, then guidance can be sought from the RICS information paper on Comparable Evidence in Property Valuation, 1st Edition, February 2012.
Our mantra (and one that has kept us mostly out of Tribunal) is that dialogue is a sign of negotiation strength and not a weakness. Recognising that a Tribunal hearing is the next best alternative to reaching a compromise isn’t it fair to say that a Tribunal hearing must be avoided whenever possible?
Still not convinced? Weighing up the costs of Tribunal versus the benefits should be your “cliff edge” moment where objectivity has to override everything else. Think before you jump!
Most Tribunal cases are a result a failure of two experts to negotiate objectively.
Mark Wilson BSc MRICS, Managing Director, myleasehold ltd