40 Chelsea Square - Knight Frank

anything, too low, depends entirely on his assessment of the value of the rights granted by the
Acts. In our judgement, if any conclusion can be drawn from this transaction at all, and we
share Mr Shingles’ doubts as to this, it is that a conventional valuation of those rights almost
certainly undervalues them.
106. It is in this context that Mr Gibbs’ evidence of what he calls “uncorrupted sales evidence
of houses”, by which he means purchases of reversions by tenants without the benefit of
enfranchisement rights, is of potential value. The purchase of 52 Eaton Terrace from the
Grosvenor Estate has the merit of being documented as to how the price was arrived at. In our
judgement the willingness of the tenant to pay 75% of a marriage value calculated on the basis
of a relativity between the leasehold and the freehold value, which is assumed to be lower than
would appear on the John D.Wood/Gerald Eve (1996) graph of supposed relativities, merely
shows that even on such basis the relative value of the leasehold interest is being
overestimated. In our judgement the transaction does not justify analysis from which any
conclusion as to the market yield from an investment in a reversion can properly be drawn.
The mere fact that negotiation proceeded from what would have been paid under the Act, if the
tenant had had enfranchisement rights under it, shows how completely the no-Act world has
disappeared.
107. In the other cases to which Mr Gibbs refers, 52 Cadogan Lane and 6 Tite Street, there is
not even agreement as to the basis of the figures arrived at, and, as he accepted in cross-
examination, one can by changing the assessment of relativity get any answer one may like.
We do not feel able to derive any assistance from these transactions.
108. Mr Orr-Ewing referred to the sale in about September 2002, of the rack rental income
amounting to £142,500 per annum of premises at 16 Ovington Square SW3. Even if his
analysis of the transaction had not been disputed by Mr Cullum, we do not think that the sale of
such an income stream can be of assistance to us in arriving at a deferment rate as opposed to a
capitalisation rate. For the same reason Mr Cullum’s own reference to transactions concerning
3 Ennismore Gardens in March 2003 and Flats 7, 8 and 9, 14/15 Ennismore Gardens in
February 2004, although having the advantage that they are concerned with ground rents rather
than rack rents, are of no assistance in assessing the deferment rate as opposed to the
capitalisation rate.
109. We are grateful to the witnesses who have done their best to produce market evidence
which might have been of assistance. Their failure to do so confirms us in the view that there
is none and the circumstances which now exist make it virtually impossible that there can be
any. The transactions to which we have been referred can be categorised as:-
(i) sales in which excluded parties took part, either increasing the price or, where there
would be a right of pre-emption, reducing it;
(ii) sales where the result of analysis under the Act makes the resultant deferment rate a
matter of circularity, when the probable proper conclusion is that the value of the
statutory right has been underestimated;
(iii) sales driven not by the value of the reversion, if any, but by the income stream.
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