An excellent settlement has been reached for the participating leaseholders in a collective enfranchisement claim on the Day Estate where there were six flats – three on short (15.3 year) leases and three on long (120.3 year) leases. Three leaseholders participated; three did not. The settlement secured wins for my clients and me in every area of the valuation.
The key factors on which I based my initial advice on where my clients should pitch their offer on the Initial Notice were:
The Deferment rate – settled at 0.25% above the generic base of 5% on the short lease flats. This recognised that we are now just over the turning point in the market cycle, and consequently an investor would pay less to protect against the risk that the investment to the three short lease flat reversions will be worth less when they mature in 15.3 years’ time.
Relativity – which was settled at 4.39% points above the ‘landlords graph’ (39.87% compared with 35.48%) for the short leases given that the maximum addition so far handed out by the tribunals would be about 5.02% points above the graph given the much awaited appeal in the Upper Tribunal where the landlord’s camp are convinced they have persuaded the tribunal that the landlords’ graph is, if anything, too high (the decision is not yet out).
This was in itself something of a triumph, in the face of the general landlord view that they have ‘won’ the hedonic regression appeals and where the same firm of landlord’s solicitors act for the Day Estate as acted for two of the three defendant landlords in those appeals.
Individual freehold values per flat – which were settled at 10% overall lower than my anticipated target.
After my initial advice to my clients on my considered best and worst-case premium range, I then thought of a new angle, ran with it, and got away with it – securing a discount of 5% to the three short lease reversions against the risk of the lessees holding over as assured tenants under Schedule 10 of the Local Government & Housing Act 1989.
My clients ended up with a settlement premium not only £856,100 (35.4%) lower than worst anticipated settlement target but £4,400 lower than my initial estimate.