Property & Real Estate Barristers
James Fieldsend appears for the successful appellant in case about disregard of improvements
14th April 2022
James Fieldsend, led by Stephen Jourdan QC, appeared for the successful Respondent, Mrs Alberti, in the case of Alberti v Cadogan Holdings [2022] EWCA Civ 499. Judgment was handed down by the Court of Appeal on 13 April 2022.
The underlying dispute concerns the price to be paid by Mrs Alberti for a house in Chelsea under the Leasehold Reform Act 1967. Within that dispute a specific issue arose as to the correct approach to the valuation exercise and in particular the interpretation and application of s.9(1A)(d) of the 1967 Act, which directs the valuer to assume that:
“… the price be diminished by the extent to which the value of the house and premises has been increased by any improvement carried out by the tenant or his predecessors in title at their own expense.”
The importance of that assumption to the parties’ dispute can be summarised as follows:
The lease of the property was granted in the 1970s. At that time the house was divided into five flats. The then tenant carried out works to covert the building back to a single house. It was agreed that those works were improvements for the purposes of s.9(1A)(d). At the time, planning permission for the works was not required. In 2019, the tenant made a claim to acquire the freehold under the 1967 Act and then assigned the lease and the benefit of the notice of claim to Mrs Alberti. By the valuation date the building was listed and the policies of the local planning authority had changed. If at that date the building had remained as five flats, it was agreed that (1) the conversion works would require both listed building consent and planning permission and (2) there was no chance of obtaining those consents.
It followed, said Mrs Alberti, that applying s.9(1A)(d) the house is to be valued as if on the valuation date it could only be used as five flats and could not lawfully be used as a single house. Cadogan argued that the house is to be valued as if configured as five flats but on the assumption that it was lawful to convert the property to, and use it as, a single house.
The point was framed as a preliminary issue. It was decided in favour of Mrs Alberti by the Deputy President of the Upper Tribunal (Lands Chamber). Cadogan appealed.
The Court of Appeal dismissed the appeal. Giving the judgment of the Court, Sir Keith Lindblom, the Senior President of Tribunals agreed with the Deputy President:
“if one is to ascertain the extent to which the value of the property has been increased by the improvements carried out by [the tenant], one must not shut one’s eyes to what was achieved by those improvements, namely, under the planning legislation, the emergence of an established use of the building as a single house after its occupation in that use”.
To interpret s.9(1A)(d) as only requiring a counter-factual assumption that the improvements (the conversion works) were not carried out, would give the provision only partial effect. To give it is intended effect, it is necessary to also assume that the property did not have established use as a single house. That is consistent with one of the five principles applicable to the interpretation and application of statutory deeming provisions set out by Lord Briggs in Fowler v Revenue and Customs Commissioners [2020] UKSC 22 at [27], “the court should not shrink from applying the fiction created by the deeming provision to the consequences which would inevitably flow from the fiction being real …”.
In rejecting Cadogan’s argument, the Court found no inconsistency with its interpretation and the “reality principle”. As was observed by Mummery LJ in Harbinger Capital Partners v Caldwell [2013] EWCA Civ 492 at [122], “… the principle does not determine or limit what the statute commands us to assume contrary to reality … the statute determines that. The reality principle is about what is not covered by the statutory assumption.”
The judgment is available here.