UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2014] UKUT 184 (LC)

UTLC Case Number: TMA/105/2012

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

TAX – capital gains tax – residential premises – leasehold – value at 31 March 1982 – comparables – marriage value – share of undivided beneficial interest – value of leasehold interest determined at £3,164 – appeal allowed in part

 

 

IN THE MATTER OF A NOTICE OF REFERENCE OF AN

APPEAL UNDER SECTION 46D OF THE TAXES MANAGEMENT ACT 1970

 

 

 

 

BETWEEN NARAYAN CHANDRA CHAKRAVORTY Appellant

 

 

and

 

 

HER MAJESTY’S REVENUE AND CUSTOMS Respondent

 

 

 

Re: 98 Sutherland Avenue

London, W9 2QR

 

 

 

Before: A J Trott FRICS

 

Sitting at: 43-45 Bedford Square, London, WC1B 3AS

on

11 April 2014

 

The Appellant in person

Ned Westaway, instructed by HMRC Solicitors Office, for the Respondent

The following cases are referred to in this decision:

St Clair-Ford v HM Revenue and Customs TMA/215/2005 (Lands Tribunal), BAILII: [2006] EWLands TMA_215_2005

Newman (HM Inspector of Taxes) v Hatt TMA/207/2000 (Lands Tribunal), BAILII: [2001] EWLands TMA_207_2000

The following cases were referred to in argument:

Monro (deceased) v Inland Revenue Commissioners (2000) 40 RVR 81

Cannon v Speight (VO) (1990) 30 RVR 100

 

DECISION

Introduction

1.             This is a reference under section 46D of the Taxes Management Act 1970 by Mr Narayan Chakravorty (the appellant).  He is appealing against the determination by Her Majesty’s Revenue and Customs (the respondent) of the value of his leasehold interest in 98 Sutherland Avenue, London W9 2QR in the sum of £1,450 as at 31 March 1982.  In his notice of reference the appellant states that the correct value should be £275,000.

2.             The context of the determination is the computation of taxable gains for the assessment of capital gains tax under the Taxation of Chargeable Gains Act 1992.

3.             The appellant appeared in person.  He adduced an expert valuation report prepared by Mr Mark Jolliffe FNAEA ARLA, the director and senior valuer for residential sales of MacMillans, a private firm of estate agents.  Mr Jolliffe was not called to give evidence and his expert report was therefore untested.

4.             Mr Ned Westaway of counsel appeared for the respondent and called Mr Martin Single BA MRICS, principal valuer in the Westminster office of the Valuation Office Agency, as an expert valuation witness.

Facts

5.             I derive the following facts from the evidence. 

Location and description

6.             Sutherland Avenue is located between Paddington and Maida Vale, a short distance to the west of Lord’s Cricket Ground.  It runs between Harrow Road to the west and Maida Vale to the east.  It is not a main traffic thoroughfare and is an established residential road.  No. 98 is a mid-terrace property located on the north side of Sutherland Avenue, approximately halfway along its length.  It is approximately 0.5km north of Warwick Avenue tube station.

7.             The appeal property appears to have been constructed as a single house but was subsequently converted into a house in multiple occupation with rooms probably being let as non self-contained residential units.  It is of solid brick construction on lower ground, ground and three upper floors under a slate roof and with single-glazed timber sash windows.  The property was in a poor state of repair and was not fully occupied at the valuation date (31 March 1982).

8.             The appeal property and a large part of the surrounding area was owned by the Church Commissioners for England at the valuation date.

History of the appeal

9.             The Church Commissioners granted a lease of the appeal property for 9.5 years from 29 September 1975 at a rent of £1,550 per annum.  On 24 August 1979 Mr Tamas Kumar Choudhuri purchased the leasehold interest for £2,950.  Mr Choudhuri and the appellant were business partners and the respondent has accepted that the appellant had a beneficial interest in the leasehold interest as at the valuation date.

10.         On 14 September 1982 the appellant purchased the freehold interest in the appeal property from the Church Commissioners for England, subject to the lease, for £40,000.

11.         On 1 October 2002 the appellant sold the freehold interest to Belgrave Investment Group Limited for £1.3m.  This constituted a disposal for the purposes of capital gains tax.

The issues

12.         There are two issues in this appeal:

(i)                 the open market value of the leasehold interest in the appeal property at the valuation date; and

(ii)               the amount of the appellant’s undivided beneficial interest in the leasehold interest.

Leasehold or Freehold

13.         The interest to be valued is that owned by the appellant as at the valuation date.  That was the leasehold interest purchased by Mr Choudhuri in August 1979 and in which Mr Chakravorty owned a beneficial interest.

14.         The appellant has consistently, but wrongly, argued that it is the freehold interest that should be valued.  At the hearing Mr Chakravorty said at the valuation date he was in tripartite discussions with both the Church Commissioners and Westminster City Council (who had apparently served statutory notices because of the poor condition of the appeal property) about the possible acquisition of the freehold.  There is no dispute on the facts that at the valuation date the appellant had not acquired the freehold interest and that he only had a beneficial interest in the leasehold.

15.         Mr Chakravorty summarised his position in his skeleton argument as follows:

“3.1 Because the appellant had control and beneficial interest the following arguments were put forward whilst valuing the property at the material date that is March 1982.

3.1.1 Rights of the leaseholder for renewal of the leasehold and

3.1.2 Reverse premium having been paid to the leaseholder by the freeholder to take advantage of the market value of the property.”

Mr Chakravorty contended that “the valuation of the property should be considered very near to market value freehold.”

16.         Two points arise from these comments.  Firstly, as at the valuation date the leaseholder had no statutory rights to renew the lease.  At that time the relevant legislation was the Leasehold Reform Act 1967, as amended.  This conferred a right to acquire the freehold or an extended lease on a tenant of a leasehold house where the tenancy was a long tenancy (granted for a term of years certain exceeding 21 years) at a low rent.  The appellant did not qualify under this, or any other, Act to acquire the freehold interest in the appeal property.

17.         Secondly, I established at the hearing that the appellant’s reference to a “reverse premium” is actually a reference to marriage value.  Marriage value can be taken into account as part of the market value of the leasehold interest that is to be determined and, to that extent only, the value of the freehold interest in the appeal property is relevant to the first issue in this appeal.  But it is the value of the leasehold interest, including any marriage value, that falls to be determined for the purposes of assessing the capital gains tax liability.

18.         Regrettably the appellant has misunderstood this position throughout and has, in the absence of adequate professional advice, pursued an irrelevant argument.  To this end Mr Chakravorty instructed Mr Jolliffe, his expert valuer, to express his “opinion as [to] the open market value of the said freehold in question as at 31 March 1982, on a vacant possession basis…”  Mr Jolliffe reiterated these instructions in his rebuttal report where he stated that “my instructions were to value the property on a freehold basis, while I understood the interest held was leasehold…”  Those instructions were not relevant, other than to the assessment of marriage value, to the determination of the first issue, namely the open market value of the leasehold interest.

Issue (i): the open market value of the leasehold interest

The case for the appellant

19.         Mr Jolliffe said in his report that the open market value of the freehold interest in the appeal property was £250,000 taking into account its condition and its position within central London.  He relied upon comparable freehold sales at 127 and 134 Sutherland Avenue which were sold by auction in July and June 1983 for £120,000 and £115,000 respectively.  Both properties were “almost certainly” in need of modernisation and refurbishment.  Mr Jolliffe did not adjust these transactions for time to the valuation date.  He also relied upon the sale of two self-contained flats in 163 Fernhead Road which he knew well.  The ground floor flat was sold in 1984 for £34,200 and the second floor flat was sold in “1981-1982” for £27,500 but requiring “complete modernisation and updating.”  Mr Jolliffe did not state the length of the leasehold interests and again there were no adjustments for time to the valuation date.

20.         Mr Jolliffe did not explain how the sales at Nos. 127 and 134 supported his valuation of £250,000.  Instead he appears to have based his valuation on the assumption that the value of a three storey residence in Fernhead Road would be worth £90,000, being three times the value of an individual flat which he took at £30,000.  He said that “one would expect to see at approximately a figure approaching three times value for the Sutherland Avenue house, due to size, its position and appearance.”  This would give a freehold value for the appeal property of £270,000.

21.         He further supported his valuation by reference to the Nationwide House Price Calculator for Greater London.  He took the sale price of £1.3m in October 2002 (which he said was Q1 rather than Q3) and indexed it back to Q1 of 1982.  This gave a figure of £237,783.  In his rebuttal report Mr Jolliffe dismissed Mr Single’s reliance upon an investment valuation for the appeal property which he described as “seriously flawed”.  Mr Jolliffe said that this type of property was sold for its break-up value and not for re-letting to regulated tenants.

The case for the respondent

22.         Mr Single assumed that at the valuation date the appeal property was in a poor condition and not fully let.  Doing the best he could by examining the electoral roll and the records of the rent officer he concluded that a maximum of six rooms would have been available for occupation at the valuation date.  Given that there were only three years unexpired on the lease and no right to extend it, Mr Single concluded that it would not have been economically viable to undertake the necessary repairs and improvements to make the remaining rooms habitable.

23.         Mr Single’s primary approach was to carry out an investment valuation.  From an analysis of the rental information that he had obtained for both the appeal property and other lettings at 29 and 34 Sutherland Avenue, Mr Single concluded that the rental value of the appeal property was £12 per week at the valuation date for a room with a shared bathroom and WC.  Assuming that six such rooms could be let this gave an annual gross income of £3,744 per annum.  He deducted the rent payable of £1,550 to give a net rent of £2,194 per annum.

24.         Mr Single also relied on the sales of 29 and 34 Sutherland Avenue for evidence of investment yields.  An analysis of the freehold sale of No. 29 showed an initial yield (net of rates) of 11.23% while No. 34 showed an initial yield of 9.62%.  Allowing for the dilapidated condition of the appeal property, the short unexpired term of the lease and the Bank of England base rate of 13.25% at the valuation date, Mr Single considered that the appropriate remunerative rate for the appeal property was 14.5% with a tax adjusted (40%) sinking fund of 3%.  Applying the years’ purchase dual rate to the net annual rent gave a capital value for the whole of the leasehold interest in the appeal property of £3,207.

25.         Mr Single supported his primary approach by reference to the sale of the leasehold interest in the appeal property in 1979 for £2,950.  He also considered the sale of the freehold interest in the appeal property to Mr Chakravorty in September 1982 for £40,000.  He considered that this price reflected the existence of the lease and that the property would have been worth £45,000 to £50,000 with vacant possession.  This was in line with the sales of 29 Sutherland Avenue in May 1981 for £45,000 and 34 Sutherland Avenue for £38,000 in March 1982 both of which were smaller than the appeal property although probably in not such a dilapidated condition.

26.         In his rebuttal report Mr Single distinguished the two freehold sales referred to by Mr Jolliffe at 127 and 134 Sutherland Avenue.  No. 127 had a high estimated net income of £25,654 per annum.  There were 14 bedsits and a self-contained basement flat.  There were four regulated tenants.  Mr Single thought that the purchaser would have been an investor looking for an immediate return rather than a developer planning to convert the property into self-contained flats.  No. 134 comprised a total of six self-contained flats of which three were vacant and the other three were let but apparently not subject to registered rents.  Mr Single considered that this property was probably sold to a developer looking to convert the whole of the property into self-contained flats. 

27.         127 and 134 Sutherland Avenue were sold in July and June 1983 respectively.  Mr Single said that the market had improved since the valuation date and referred to the sale of 34 Sutherland Avenue in October 1983 for £65,500 having been sold previously in March 1982 for £38,000.

28.         Mr Single disputed Mr Jolliffe’s assumption that the properties in Fernhead Road could be sold in their entirety for £90,000 since the developer would make an allowance for upgrading costs and profit.  He gave as an example the sale of the freehold interest in 216 Fernhead Road in January 1982 to a housing association for £28,650.

29.         At the hearing Mr Single produced a supplementary report that dealt with marriage value.  He said that at the valuation date the Church Commissioners for England had adopted a disposal policy for their properties in and around Sutherland Avenue.  He considered that speculators might have been interested in acquiring freehold and leasehold interests in order to undertake flat conversions.

30.         Mr Single said that the evidence of comparable sales “demonstrate a very wide range of values for freehold residential investment properties”.  Having reviewed all the evidence he thought it possible that the typical value for a freehold unencumbered by a short lease but in poor condition would be approximately £60,000 as at the valuation date (an increase from his previous figure of £45,000 to £50,000).  Adopting this as the unencumbered freehold value meant that there was a marriage value of £16,750 having deducted the price obtained for the encumbered freehold interest (£40,000) and the value of the leasehold interest (taken at £3,250).

31.         Mr Single divided the marriage value 75:25 in favour of the freeholder to reflect the fact that the bulk of the combined value lay in that interest.  The marriage value was also uncertain to be achieved because some tenancies benefited from Rent Act protection; the property was in poor condition; and the hypothetical purchaser of the leasehold also had to buy the freehold interest.  Taking all these factors into account Mr Single considered that there should be a 20% discount in the marriage value.  This gave a total value for the leasehold interest of £6,600 comprising a leasehold value taken at £3,250 and marriage value of £3,350.

32.         As a further check Mr Single referred to the sale of the leasehold interest in 123 Sutherland Avenue for £13,500 on 15 March 1982.  The lease was for ten years from 25 March 1978 at a rent of £3,100 per annum “subject to review.”  The purchaser was a development company.  There were no details about the rent review or about the rent receivable.  The condition of the property was unknown.  Mr Single said the “inference is” that the freeholder was the Church Commissioners for England.  He said that this was a lease with a longer unexpired term (6 years) than that on the appeal property and would therefore be worth more.

33.         Mr Single explained that the Church Commissioners “were seeking to off-load” their freehold properties in this area from late 1981 onwards and that this policy gathered momentum throughout 1982.  He believed that it carried on into 1983 but he was not certain when the disposals finished.  Many of the Church Commissioners’ properties were in poor condition and were let on short leaseholds from 8 to 10 years.  There was speculator interest in acquiring both freehold and leasehold interests and then converting the properties into self-contained flats that could be sold on long leases.  Mr Single pointed out that around the valuation date the base rate was falling and the financing of such development schemes was becoming easier.  At the valuation date the base rate was 13.25% (having been as high as 17% in November 1979) but by the date of the sale of Mr Jolliffe’s comparables at 127 and 134 Sutherland Avenue in June 1983 the base rate had fallen to 9.8125%.

Conclusion

34.         Not only was Mr Jolliffe instructed to provide the wrong valuation, he was not called by the appellant to give oral evidence.  In a letter to the appellant dated 4 November 2013, to which I referred at the start of the hearing, the Tribunal said:

“The member reminds the appellant that he has adduced expert evidence from Mr Mark Jolliffe.  It is expected that Mr Jolliffe will attend the hearing to present his evidence and to be cross-examined upon it.  If Mr Jolliffe does not appear his expert evidence will be untested and the weight to be attached to it by the Tribunal will be affected accordingly.”

The appellant was given ample notice of the consequences of not calling his expert and yet he decided not to do so.  Mr Jolliffe’s absence from the hearing and the lack of clarity of his written report mean that I place very little weight upon his evidence of the freehold value of the appeal property. 

35.         Mr Single produced a detailed and well-researched report which was balanced and fair in its conclusions.  I accept his assessment that the net rental income from the appeal property as at the valuation date was £2,194 per annum.

36.         Mr Single capitalised this net rental income at dual rate years’ purchase of 14.5%, 3% and 40% tax.  I accept the sinking fund rate and the tax rate.  Mr Single based his assessment of the remunerative rate of 14.5% upon two freehold investments sales: 29 Sutherland Avenue, which was sold in May 1981 and 34 Sutherland Avenue, which was sold in March 1982.  Mr Single’s analysis of the respective rental income of the two properties is cogently presented and I accept it.  The resultant freehold yields were 9.62% (No. 34) and 11.2% (No. 29) assuming both properties were fully let.

37.         Mr Single’s analysis assumes that both the comparable properties were in fair condition.  The evidence upon which Mr Single relies are the auction sales particulars for both properties.  These are silent about the condition of the properties and make no mention of any statutory notices having been served by Westminster City Council.  The Church Commissioners did not own the freehold interest in either property.

38.         It is known, by the appellant’s own admission, that the appeal property was in a dilapidated condition.  It is therefore reasonable to assume, given the short leasehold interest, that it would have been uneconomic for the leaseholder to spend money on refurbishing the property and that it was unlikely that the property would have been fully let at any time before the expiry of the lease.

39.         Mr Single takes the remunerative rate at 14.5% being 1.25% above the base rate at the valuation date or 4.88% above the freehold yield derived from the sale of 34 Sutherland Avenue on 2 March 1982.  Applying the same analysis to the sale of No. 29 Sutherland Avenue in March 1981 a remunerative rate of 1.25% above the base rate at that time would have been 13.25% or 2.02% above the freehold yield derived from the sale of No. 29 in May 1981.

40.         I accept Mr Single’s view that the poor condition of the appeal property and a very short lease term are factors that would justify an increase in the leasehold remunerative yield which, in any event, would be higher than the equivalent freehold yield.  But I am not persuaded that the leasehold yield should be as high as 1.25% above the base rate at the valuation date.  In my opinion by March 1982 developers would have been alerted to the Church Commissioners’ policy of disposing of its freehold estate in this area and would have shown increased competition to acquire both those freeholds and the leaseholds with which they were associated.  Without placing too much weight upon the evidence of just two sales at 29 and 34 Sutherland Avenue, such increased competition might explain, at least in part, why the freehold yield had dropped by over 1.5% between May 1981 and March 1982.  I consider that there would also be competitive bidding for the leasehold interests in order to give the developer the opportunity to exploit the redevelopment potential of the Sutherland Avenue properties.  Under these circumstances I consider a remunerative rate of 13.25% (equal to the base rate at the valuation date) to be appropriate.

41.         The valuation of the leasehold interest in the appeal property is therefore:

Net rental income: £2,194

YP 3 years @ 13.25%, 3% and 40% tax: 1.4888

£3,267

42.         In my opinion Mr Single was correct to allow for marriage value.  He does so by taking the unencumbered freehold value as £60,000 and the encumbered freehold value as £40,000, which was the actual sale price in September 1982.  He supports his analysis by reference to the encumbered freehold comparables at 29 and 34 Sutherland Avenue.  He distinguishes the appeal property from Mr Jolliffe’s comparables at 127 and 134 Sutherland Avenue for the reasons outlined at paragraph 26 above.  There is no direct evidence of the sale of a freehold with full, as opposed to partial, vacant possession. 

43.         Mr Jolliffe indexed the sale price of the freehold interest in 2002 back to the valuation date.  I do not consider the use of an index over 20 years to be a useful exercise.  As Mr Single said in his rebuttal report:

“The interest, the pattern of letting and the type of tenancies subsisting in the property were in all likelihood very different in 2002 than was the situation in 1982.  Any of these factors could have a significant effect on value.”

I would add that the condition and layout of the appeal property was likely to be very different in 2002 to that at the valuation date.  The Nationwide House Price Calculator used by Mr Jolliffe reflects movements in the price “of a typical property” in a region “rather than in specific towns and cities”.  It “cannot take account of differences in quality of fittings, decoration etc.”  In short it is a very blunt instrument indeed and should not be used to value a specific type of property in a specific location and certainly not over such a long period as 20 years. 

44.         Mr Single adopts a figure for the unencumbered freehold value that he describes as being at the low end of the range.  I think he was justified to do so for two reasons.  Firstly, because of the “dilapidated condition” (the appellant’s words) of the appeal property and, secondly, because the market appears to have improved by the time of the sales of 127 and 134 Sutherland Avenue in June and July 1983.  This is demonstrated by a further sale of 34 Sutherland Avenue in October 1983 for £62,500, having previously been sold for £38,000 in March 1982.  The sale price had increased by over 64% compared with an increase of the rental income over the same period of approximately 20%.

45.         In my opinion Mr Single’s assessment of the unencumbered freehold value of the appeal property at £60,000 as at the valuation date is reasonable and I adopt it.

46.         Mr Single does not divide the marriage value equally between the freeholder and the leaseholder but instead apportions it 75:25 in favour of the former.  He does so because “the bulk of the value of this property lies in the freehold interest.”  The leaseholder only has a three year unexpired term and by waiting for a short period the freeholder would obtain all of the marriage value as the value of the leasehold interest reduced to nil value.  I accept Mr Single’s apportionment of the marriage value.

47.         Mr Single reduces the marriage value by 20% to reflect the possibility that the purchaser of the leasehold would not be able to realise that marriage value by a subsequent acquisition of the freehold.  Mr Single also says that the assessment of the freehold value at £60,000 depends upon obtaining vacant possession and that this is not certain because of the existence of some protected tenancies under the Rent Act.  The Church Commissioners had adopted a freehold disposal policy by the valuation date and Mr Chakravorty said that he was already talking to them about a possible sale at that time.  In my opinion a prospective purchaser of the leasehold interest at the valuation date would feel confident that the Church Commissioners would be prepared to enter into early and meaningful negotiations for the sale of their freehold interest in the appeal property.  I consider a 20% risk allowance to be too high and I allow 10% to reflect the uncertainties of obtaining vacant possession of the freehold.

48.         My calculation of the marriage value is therefore:

Unencumbered freehold value: £60,000

Less:

(a) value of leasehold interest: £  3,267

(b) value of present freehold interest: £40,000

£43,267

Marriage value: £16,733

Marriage value apportioned to leasehold @ 25%: £  4,183

Less 10% for risk in obtaining vacant possession: £ 418

Marriage value payable to leaseholder: £  3,765

49.         The total value of the leasehold interest is therefore £7,032 (£3,267 plus £3,765).

Issue (ii): the amount of the leaseholder’s undivided beneficial interest

50.         Mr Chakravorty said of the leasehold interest that the “ultimate responsibility and benefit was that of the appellant” and that the owner of the legal interest, Mr T K Choudhuri, did not have any responsibility for the day-to-day operation and management of the property.  The papers and documents of the appellant’s former solicitor had been taken over under statutory powers by the Law Society but those relating to this appeal were not returned and were lost.  Mr Chakravorty said that this meant he was unable to corroborate his evidence on this point through no fault of his own.  It was Mr Chakravorty who discussed the statutory notices with Westminster City Council and who had paid the £40,000 to acquire the freehold.  Mr Chakravorty had done all the work associated with the ownership of the leasehold interest and he considered that his was a 100% share in the beneficial interest. 

51.         The respondent accepted that the appellant owned a beneficial interest in the appeal property, although it had done so as a concession and not as a result of any evidence.  The respondent said that the appropriate undivided share was 50%.

52.         Mr Single said that the normal approach in valuing such an undivided share was to take the arithmetic share of the entirety value (in this case 50%) and then to make an appropriate discount to reflect the disadvantages in owning a part share.  He said that in respect of a half share where the co-owner is not in occupation of the property (as here) the normal discount was 10%.

53.         Mr Single supported his 10% figure by reference to St Clair-Ford v HM Revenue and Customs TMA/215/2005 (Lands Tribunal) in which the member, Mr P R Francis FRICS, said at [20]:

“… I am satisfied on the evidence that 10% is indeed the customary discount applied to half shares particularly where they are undivided and there is no likelihood that the surviving partner will remain in occupation (as in a residential property with tenants in common).  There is evidence to suggest higher discounts for minority shares and where there may other complications, but in the circumstances of this case, I have not been taken to any authority which suggests a departure from convention would be appropriate.”

54.         Mr Single also relied upon Newman (HM Inspector of Taxes) v Hatt TMA/207/2000 (Lands Tribunal) in which the member, Mr N J Rose FRICS, said at [30]:

“The final issue relates to the discount, if any, that should be made to reflect the fact that Mr Hatt only owned one half of the subject property.  Mr Whitehill considered that a deduction of 10% was appropriate, where as Mr Hatt made no allowance.  I agree with Mr Whitehill that the owner of such a share would face difficulties in realising his asset, which would not arise if he controlled the entirety of the property and, in the absence of any other evidence, I accept his deduction of 10%.”

Conclusion

55.         Prior to the hearing the only evidence to distinguish the interests of Mr Choudhuri and Mr Chakravorty was the fact of Mr Choudhuri’s legal title.  Neither Mr Choudhuri or Mr Chakravorty were in occupation of the appeal property.

56.         At the hearing Mr Chakravorty said that he and Mr Choudhuri had paid 50% each of the purchase price of the leasehold interest in 1979; that the rental income, although collected by Mr Chakravorty, was shared between them in equal proportions; and that outgoings were funded from the rental income.

57.         It appears that Mr Choudhuri took no active part in the management of the property following the acquisition of the leasehold interest, but he could not be called to give evidence because he  no longer resides in England and Mr Chakravorty does not know of his whereabouts.

58.         Although there is a lack of detailed evidence on this issue it seems as though Mr Chakravorty and Mr Choudhuri entered into the purchase of the leasehold interest as equal partners.  Mr Chakravorty said he could not have a legal interest in the property because he would be in contravention of his then terms of employment as a civil servant.  In my opinion it is reasonable to assume that Mr Chakravorty’s undivided beneficial share in the leasehold interest was 50% and I so determine.

59.         I am satisfied from Mr Single’s evidence and the two cases that he relies upon that there should be a 10% reduction in the value of the appellant’s 50% undivided share to reflect the difficulties in realisation that such a share entails.

Valuation

60.         I have determined the value of the leasehold interest at £7,032 (see paragraph 49 above).  Mr Chakravorty’s share of that value is, at 50%, £3,516.  This figure must be reduced by 10% to reflect the disadvantages of owning an undivided share.  The value of the appellant’s beneficial interest in the leasehold interest is therefore determined at £3,164. 

Determination

61.         The appeal is allowed in part to the very limited extent that the value of the appellant’s undivided beneficial interest is determined at £3,164 rather than the respondent’s original figure of £1,450 (subsequently revised to £3,000).  The appellant’s original figure of £275,000 (subsequently revised to £250,000) is greatly exaggerated, wholly unrealistic and based upon a valuation of the wrong (freehold) interest.

62.         A letter on costs accompanies this decision which will take effect when, but not until, the question of costs is determined.

 

Dated:  30 April 2014

 

A J Trott FRICS