As a rule Upper Tribunal decisions contain nuggets of wisdom and demonstrate clear and calculated insight into the issue or issues at hand. The case of Sloane Stanley v Morgan was one such case where remote development potential was described as being a “gambling chip”. What a clever explanation and approach when considering risk!
On a roulette table, hit a single number between 0 and 36 and the house pays 36/1, cover 2 numbers with a single chip and the return is 16/1, and cover 4 numbers its 8/1. It’s not uncommon for speculative development in our enfranchisement world to be valued in the same risk/reward based way. One of our cases followed the principle favourably for our nominee purchaser client in the case concerning Berkeley Court.
It is always important to keep in mind that following the Act, Tribunals value to the date of the Notice of Claim –so the question asked is “was there planning permission”, yes or no? If it is a no, then what is the prospect of planning being granted? At this juncture other experts such as planners or engineers may be required as questions such as “what are the chances of obtaining planning consent?” and “can the building even withstand the extra storey or proposed development?”. These were the key issues in this case study.
Summarizing the valuation issues, the Landlord had claimed £671,245 and acting for the purchasers, we had valued the freehold to be worth £209,350.
Our senior valuer Ghulam Yasin had tried to reach a compromise and settle pre-Tribunal, but the Landlord’s valuer was simply too bullish and in his outlook, especially on the issue of development costs. It doesn’t take much creativity to value any rooftop to be worth that of a hidden treasure, but when we, as experts, drill down and ask awkward questions the value soon tumbles.
With the Tribunal deciding £15,250 for the claimed development value we felt victorious and vindicated with our valuation stance, with the total premium being determined to be worth £350,250.
Talking to one of our other clients the other day, who specialises in roof top developments with a wealth of experience, he quite rightly said, “you simply can’t underestimate the cost of roof top development. If you do then you will lose money!”
Wise words indeed and, as at the date of valuation in our case study no permission existed, then it is no wonder the Tribunal shared Ghulam’s view that the development value was worth that of a roulette chip.
myleasehold’s perspective is that a Tribunal determination is the last resort and all skill must be used to prevent a hearing. However, on occasion, a hearing must indeed be forced.