Enfranchisement: can FTT undertake the material enhancement valuation exercise?

It is not the role of the First-tier Tribunal to carry out an assessment of whether a restrictive covenant materially enhances the value of a freeholder’s retained interest for the purposes of whether the same should be included in a conveyance transfer at enfranchisement. In Chapman and another v Alaska Management Co Ltd [2023] TR/LON/00BE/0CE/2022/0125, the FTT was asked to determine whether the transferee should be the beneficiary of a number of disputed restrictive covenants as part of the determination of the terms of acquisition in a collective enfranchisement claim. The applicants were the long leaseholders of two flats situated in Alaska Buildings, Bermondsey, London SE1. The respondent was the freehold reversioner of the building in which their flats were situated. Pursuant to section 24(1) of the Leasehold Reform, Housing and Urban Development Act 1993, an application was made by the lessees for a determination of the terms of the acquisition of the freehold interest in the building. The applicants were jointly the participating tenants and the nominee purchaser. At the hearing before the FTT, it was common ground between the parties that two conditions had to be met before a restrictive covenant would qualify for inclusion in a conveyance transfer at enfranchisement. First, the freeholder had to demonstrate a “discernible need” for the restrictive covenant. Second, the covenant required should materially enhance the value of the freeholder’s retained interest. The respondent had failed to obtain any expert evidence to establish that the disputed restrictive covenants would materially enhance the value of its retained land. Instead, the respondent invited the FTT, as an expert tribunal, to carry out the valuation exercise. The FTT declined. Relying on case law before the Upper Tribunal (Lands Chamber), the FTT noted that the UT, a superior tribunal, had itself refused to carry out such an assessment. In the circumstances, it would be inappropriate for the FTT to undertake the valuation exercise. The FTT determined that the respondent had failed to provide any compelling evidence that material enhancement to its retained land would ensue from adopting any of the disputed restrictive covenants. Elizabeth Dwomoh is a barrister at Lamb Chambers