Disputes over valuation probably account for most of the disputed enfranchisement cases that are referred to the First-tier Tribunal (Property Chamber). Very often the arguments are over the correct approach to valuing the freehold. In other cases the parties may seek a determination where they cannot agree on the deferment rate to be applied. It is a widely shared experience that landlords, leaseholders and their respective valuers will usually be able to agree on the valuation of the ground rent that the landlord will lose once the freehold is transferred to the leaseholder, or a new lease is granted, as the case may be. It forms part of the premium payable but in comparison to the amount payable for the freehold, it is usually a small part of the premium.
In Plotnek v Govan [2014] UKHT 0332 the Upper Tribunal considered an appeal against a decision on the premium payable for the enfranchisement of a leasehold house under the Leasehold Reform Act 1967. Unusually, the disagreement in this case was over the appropriate way to value the ground rent. The lease contained a ground rent review clause with four review dates during the term of the lease which was granted in 2008 for a 99-year term for a premium of £170,000. The initial ground rent was £125 each year, in other words, a nominal ground rent.
Clause 6 of the lease provided, in summary, that the increase should be linked to the open market value of the lease on certain assumptions. For the landlord freeholder (Mr Plotnek) it was argued that on review the new rent should be assessed on the open-market value of the property, assuming that no new premium is taken. In other words, the reviewed rent could well be something other than a nominal rent and should be a substantial rent that is a full ground rent (with a substantially higher premium).
