The client enjoys “the last laugh”

A most satisfactory result indeed! My client has been trying to reach agreement to extend his short lease of just under 20 years since April 2013 having initially attempted to reach settlement peacefully without serving a formal notice under the 93 Act for an extended 90 year lease. He thought he got on well with his overseas resident landlord to only find that despite formal negotiations between instructed valuers taking place, the landlord had a far higher opinion as to the premium receivable for the lease extension than even his own (and very respected) valuer advised!

In reality, landlord would settle for no less than £2m being some £225,000 higher than the premium his own valuer could support at very best and over £500,000 higher than the advice I advised my client to offer. So the only solution was to serve a formal s42 notice to fix the valuation date to stop the existing lease from decaying (as hitherto the landlord had applied a moving valuation date) as well as have access to the First-tier Tribunal for determination if the premium / lease terms could not be resolved in negotiation. Notice was accordingly served in April 2015 when the lease had now decayed to just under 19 years unexpired.

As much as the landlords previous position then increased by a further £600,000 to £2.6m, negotiations restarted with the landlord’s valuer and progress was ultimately made as to agreeing the unimproved freehold value and most other valuation issues save principally relativity pending the determination of the Upper Tribunal in the hedonic regression Elm Park Road appeals. A date was fixed for the hearing in early March to which at the last moment the landlord sought adjournment pending the UT decision. The lower tribunal granted an adjournment to 24th/ 25th May despite extremely compelling arguments for it not to do so as it ultimately accepted the ‘failings’ of the hitherto various graphs of relativity and was keen for itself to receive guidance from above on this much vexed issue. My client was extremely frustrated as he wanted the hearing to have gone ahead irrelevant of the UT determination in order to not miss the summer market to sell his flat on the extended lease.

As the FtT has strict directions that needed to be observed, the landlord’s side was very much aware that the case needed to be settled, or prepared for in advance of the postponed end May hearing date. The Landlord’s UK agent contacted my client directly to suggest settlement at a premium approximately £80,000 higher than the premium I had advised my client to pay which in effect settled existing lease differential at the Gerald Eve 1996 graph of relativity. The agent also let on that he did not want to go to the tribunal.

My client asked me for my advice as he was inclined to accept the landlords offer to settle. I told him not to but to stick to our figure as the landlord’s side had no idea that we had draft proofs of evidence already prepared to ensure we were on ‘the front foot’ including additional arguments to adjust back to an overall settlement premium at about the same level even if the UT determined relativity in favour generally of the lessor in the Elm Park Road appeals (which it did.)

A few days later my client came back to me to say he had settled finally at a premium of just £15,000 higher than my position to reach a conclusion which when analysed into the working valuation model adopting all the other aspects that were agreed with the landlords valuer showed a relativity ‘needed’ of 10% higher than the Gerald Eve graph. Settlement was formally confirmed with the landlords valuer in open correspondence as he too had heard from his client’s agent that a deal had indeed been reached which cemented a saving of 41% off the landlords formal asking premium.

3 days later the UT handed down its decision in the Elm Park Road appeals which indeed would indicate that the premium would emerge at least £65,000 higher than the figure settled.

My client indeed had ” the last laugh.”