40 Chelsea Square - Knight Frank

y Mr Arbib has not been deducted when making comparisons but allowances of £650,000 in
respect of no 43 and £500,000 in respect of 41 had been when making comparison with 40
Chelsea Square.
35. This house is listed Grade II*; the other main comparables are either not listed or listed
Grade II (41 Chelsea Square). The sales particulars of 40 Chelsea Square referred only to
Grade II and Mr Arbib did not become aware of the higher listing until after purchase. A
Grade II* listing is of concern when a house requires improvement. Most purchasers found
listing restrictive and it reduces the appeal of the property. Overseas purchasers would not
readily become involved in such a property. Purchasers will make an allowance for added
costs. For 40 Chelsea Square Mr Flint allowed for listing by adding 15% to the costs of
improvements when making a comparison.
36. Comparables can be divided into three tiers. Tier 1, directly comparable houses in
Chelsea Square, nos 38, 43, 33, 41 and 40. Tier 2, standard houses in Chelsea Square, nos 31,
51, 11, 25 and 18. Tier 3, houses from a wider area.
37. Mr Flint commented on and analysed these comparables and made adjustments for tenure
and for time. In analysing 43 Chelsea Square Mr Flint concluded that the purchaser was an
“overeager” buyer and that this bid should be discounted under para PS.3.2.4 of the RICS
Guidance Notes (the Red Book). In answer to questions from the Tribunal, Mr Flint said that
this guidance applies to valuations under the 1967 Act and is the reason for his exclusion of a
higher bid when analysing comparables. If this guidance (the exclusion of the over eager
buyer) did not apply, Mr Flint accepted that this would undermine his analysis and valuation.
The Tier 2 comparables show that the base value for a standard freehold house in Chelsea
Square in April 2003 was between £3.5m and £4.25m. A comparison was made between 40
Chelsea Square and the other Tier 1 houses. No 41 is the best comparable (£9,314,824). They
are of similar value except for condition and the Grade II* listing. A deduction should be made
of £500,000 to reflect the superior condition of no 41 with the addition of 15% for listing. The
resultant value for 40 Chelsea Square is £8,750,000. As a cross check Mr Flint looked at the
comparables on a square footage basis and by reference to Mr Arbib’s purchase in 1997. This
equates to a freehold value at the valuation date of £12,489,082 (£2,154 per sq ft), a figure
which is too high by reference to the comparables, particularly 43 Chelsea Square. This value
has been distorted by the use of the “bottom up” approach due to Mr Arbib’s overbid to secure
the property in 1997. He paid more than the true value. The “true value” is not market value.
It excludes the premium that purchasers pay for mid-term leases. Later in his evidence,
however, Mr Flint accepted that Mr Arbib paid the market value that he had to pay to secure
the house.
38. To arrive at the no-Act leasehold value Mr Flint applied the relativity of 55%, given by
Mr Orr-Ewing, to produce a figure of £4,812,500. To find the open market value of the
leasehold interest at April 2003 he deducted the premium of £3,003,000 from his freehold
value of £8,750,000 to produce a figure of £5,747,000, an open market relativity of 65.6%.
39. Mr Cullum, for Cadogan, said that 40 Chelsea Square is a “trophy house”. These houses
realise prices which cannot be analysed in a conventional way (to a price per sq ft) and do not
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