Further thoughts on when is ‘in repair’ not ‘in repair’

In last month’s blog, I touched on the valuation implications of a flat that has fallen out of repair due to the  building itself falling out of repair within which the flat forms part due to unauthorised structural works carried out by an egregious landlord.

Although there are clear legal issues as to the landlord’s breach of covenant to keep the building in repair – the automatic assumption amongst valuers when carrying out a 1993 Act valuation for the extension of a lease is the flat has to be assumed in repair as the landlord can recover from the lessee the costs of keeping the building in repair.

So the immediate assumption by valuers is the out or repair internal condition of the flat can only be to diminish the existing lease value. This is because valuers are to value on the basis that a hypothetical purchaser of the freehold has the right to vacant possession of the flat where the structure within which it forms part, the freeholder can have repaired at a cost to the leaseholder.

BUT given the unusual circumstances here, it is logical that the value of the proposed extended lease must also be diminished to reflect the reduced value of the flat caused by an egregious landlord.

Indeed one wonders if the entire discount should be only to the future extended lease as the cause was entirely due to the freeholders unauthorised structural changes to the parts of the building that he owns.

If this is incorrect, then the discount to the existing lease must also be pro rata to that of the extended lease otherwise the effect would be draconian on the lessee who remember us the innocent party here!