Deferment rates – Zuckerman lives
re 7 Grange Crescent Halesowen 2014 UKUT 0079 (LC)
- Tribunals can rely on evidence and findings of fact in Upper Tribunal ( UT) decisions
- Zuckerman adjustment to deferment rate on property outside PCL applied
- Further adjustment for obsolescence would only apply in exceptional cases
This is a case on deferment rates relating to a lease extension claim for a flat in the West Midlands. The FTT (as LVT) found for a deferment rate of 5.75% thus lowering the price that would otherwise be payable. This was based on the Sportelli rate of 5% plus 0.5% to reflect the lower capital growth rate for properties in the West Midlands compared to Prime Central London (PCL) and 0.25% for obsolescence/cost of long term repair of the building. Evidence from the Zuckerman decision (Zuckerman v Trustees of the Calthorpe Estate  UKUT 235) was relied upon. The landlord, Sinclair Gardens Investments (Kensington) Ltd appealed to the UT. Their counsel argued that the FTT should not rely on evidence adduced in other cases and had to rely on the evidence in the case concerned. The increase for obsolescence was also challenged.
After a discussion of relevant case law the UT held that other UT decisions may be relevant upon on matters of fact or opinion evidence as well as on law or procedure and that factual or opinion evidence given to the UT in an earlier case and recorded in its decision and conclusions was admissible as evidence. However, insofar as an earlier Tribunal had made a finding of fact, a subsequent Tribunal could only take it into consideration in the light of the evidence called in the particular case. The guideline decision in Sportelli stands apart from the general rule because the deferment rate for PCL properties was unlikely to vary overtime or according to factors peculiar to individual cases and because of breadth and quality of the evidence considered by the Tribunal and courts in that case. There was more scope to depart from the Sportelli guidelines outside of PCL. However significant evidence was required to justify it a departure from the Sportelli starting point by providing a reliable indication of long-term movement in residential values such as was available in Zuckerman.
UT allowed the appeal in respect of the 0.25% adjustment to the deferment rate for obsolescence. Any allowance must be based on the characteristics of the particular property under consideration. It will only be in exceptional cases the risk of deterioration will not be reflected in the vacant possession valuable property. Something more than age or a current poor condition is required to justify any additional allowance.
Despite the fact that the respondent tenant did not take part in the appeal and that the landlord adduced expert evidence and put forward substantial argument to support its attempt to knock out the Zuckerman addition, the UT after careful analysis of the case law decided to uphold the findings of the FTT on that aspect. This is of comfort for those acting for tenants of properties outside of PCL. Inside PCL the position remains very much as per Sportelli i.e. with a deferment rate of 4.75% for houses and 5% for flats. The issue of the 0.25% addition for the difficulties with managing blocks of flats was not at issue or considered in detail but the UT confirmed that this was no longer appropriate as recognised in Voyvoda, regardless of whether the property was inside or outside PCL. Whether or not management has become significantly less onerous as result of the decision in Deajan v Benson as found in Voyvoda is perhaps debatable but that is another issue.
The confirmation that evidence and facts adduced or referred to in other UTT decisions is very helpful. However as always of great importance is the evidence produced in the particular case although the amounts at stake often do not justify the cost in gathering and presenting it to the required level.
Please note that law is a complex subject and you should not rely on this article without professional advice on the facts of your case