40 Chelsea Square - Knight Frank

agreed to be an unusual house. Essentially the differences between the parties are matters of
judgement.
56. It is common ground, that due to an absence of comparable freehold sales, it is necessary
to find the freehold value from leasehold sales, a process described as a “bottom up” approach.
Both valuers recognise the inaccuracies likely to arise in this approach. It is also common
ground that 40 Chelsea Square is one of Chelsea’s “more eye catching houses,” with a superior
architectural appearance and in a location where prices are at the top end of the Chelsea price
range.
57. Against this background we look at the evidence. In our judgement, the starting point
should be the price paid by Mr Arbib for the leasehold interest in 40 Chelsea Square in May
1997. Although Mr Orr-Ewing and Mr Flint originally prepared their evidence on the
assumption that Mr Arbib paid more than the “true value”, during the hearing Mr Flint
accepted that Mr Arbib paid the market price to secure the house. We agree. This is, prima
facie, the best evidence of value under the 1967 Act. It is the price paid for the house being
valued; it reflects the value in an unimproved condition; and it reflects the listing. It is not
therefore necessary to make any adjustments for these factors, Also, with regard to the Grade
II* listing, although we recognise that this imposes greater restrictions on alterations than in
respect of the unlisted comparables and no 41 with a lower Grade II listing, we have concluded
that the higher listing reflects the particularly attractive features in no 40 which would appeal to
a purchaser and offset any disadvantages of higher listing. Conversely, however, the price paid
for no 40 suffers from two disadvantages: a short lease and the interval of six years between
purchase and valuation date, both requiring substantial adjustments to produce the freehold
value in April 2003. Nevertheless, the advantages of this evidence outweigh these
disadvantages. We take this purchase as our starting point, to be checked against other
comparable transactions.
58. In analysing the price paid for 40 Chelsea Square and the comparables, we use a similar
approach to that adopted (with minor differences) by Mr Flint and Mr Cullum to convert
leasehold into freehold prices. This involves: a discount from the leasehold price for 1967 Act
rights; the conversion to freehold value at purchase by relativities; and the indexed conversion
of that value to value at the relevant date (1 April 2003). The adjusted prices provide the raw
material for a judgement as to the freehold value of 40 Chelsea Square.
59. The leasehold interest with approximately 30 years unexpired in no 40 was sold by
informal tender in May 1997. Mr Arbib was the successful bidder at £4,762,531. This is now
accepted to be the market value. The first adjustment is for 1967 Act rights, the leasehold
purchased by Mr Arbib giving the right to enfranchise (subject to the residency qualification
which then existed). Both valuers make a downward adjustment. Mr Flint used Mr Orr-
Ewing’s relativities adjusted to an open market relativity (60% to 69.3%) to find the freehold
value at the date of the purchase. Mr Cullum made two specific adjustments: first for 1967 Act
rights and then to convert to the freehold value. Thus, Mr Flint converted the price paid by Mr
Arbib into the freehold value by applying 69.3% (effectively 9.3% for the 1967 Act rights and
60% no-Act relativity leasehold to freehold) to produce £6,872,339. Mr Cullum deducted
10.3% for the 1967 Act rights and then used a relativity of 56.65% leasehold to freehold
(overall 63.1% compared to Mr Flint’s 69.3%). Mr Cullum’s freehold value at May 1997 is
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