Flat 1, Cropthorne Court, Birmingham

The leaseholder applied to an LVT in connection with the grant of a new lease under s.48 Leasehold Reform Housing and Urban Development Act 1993. The property was a purpose built development dating from 1931. The only issue in dispute was the price to be paid for the new lease.
The Lands Tribunal accepted that, following Cadogan v Sportelli, it was appropriate to set the deferment rate at 5% for flats and 4.75% for houses, even though the instant case might not involve property in the prime central London locations, although left open the possibility that “special factors” might justify a departure from these figures.
The Lands Tribunal also considered the correct rate of capitalisation for ground rent. In the instant case, the expert evidence was that the capitalisation rate should be the same as the deferment rate and that it would only be appropriate to adopt a different rate if the ground rent was substantial. The Lands Tribunal expressly rejected this approach, noting that the factors which determined the capitalisation rate were so manifestly different from those which are relevant to the deferment rate that there is no justification for simply adopting the same figure.
Analysis
The fall-out from the Arib / Sportelli decisions continues to be felt. It seems clear that the deferment rates suggested in Sportelli were to be treated as definitive and, whilst they have been accepted in this case, the reference to “special factors” which may justify a different result will, no doubt, cast despair into the hearts of surveyors across the country. The industry needs clear answers – the reference to “special factors” is an invitation to further litigation.