This case concerned the valuation of the amount to be paid to acquire the freehold of a house under the Leasehold Reform Act 1967. The statutory scheme requires the price to be ascertained by reference to the amount which the property might be expected to realise if sold on the open market by a willing seller, subject to a number of assumptions. One of those assumptions is that the property is sold ‘subject to the tenancy’. The tenancy in this case had been extended under the 1967 Act in the 1980s. The amount payable for the freehold would vary considerably depending on whether the valuation exercise was based on the original term (which expired in 2016) or the extended term of the tenancy (which expired in 2066).
The First Tier Tribunal determined that the tenancy to which the freehold interest was assumed to be subject was the original lease (expiring in 2016). The Upper Tribunal allowed the tenant’s appeal, holding that the freehold interest was to be assumed to be subject to the extended lease, expiring in 2066. This made the purchase price much lower. The case went to the Court of Appeal.
The Court of Appeal noted that the relevant provisions in the 1967 Act had been amended a number of times by Parliament. It went through the convoluted legislative history of this part of the Act. Ultimately, the Court of Appeal agreed with the Upper Tribunal’s decision, agreeing that the freehold interest was to be assumed to be subject to the extended lease, and dismissed the appeal.