40 Chelsea Square - Knight Frank

(16) Although a uniform deferment rate, without regard to the length of the
unexpired term, may be doubted, there is no evidence in these appeals to justify
an adjustment for different unexpired terms on the Cadogan Estate (para 170).
(17) We accept that there should be an upward adjustment of ¼% for 40 Chelsea
Square for an unusually large investment in a single house (para 171).
(18) There is no merit in the submission that because the Cadogan Estate remained of
the view that 6% was the appropriate deferment rate until December 2003, a
date after the valuation date for 40 Chelsea Square, that should be the deferment
rate in these appeals (paras 173 and 174).
(19) Changes in deferment rates will not occur until a change in the trend in risk-free
yields has become established or the continuation of a trend establishes a new
level of yields. In the circumstances in these appeals, no adjustments are to be
made for the different dates of valuation (para 179).
Deferment rates – Cadogan cases
181. Mr Cullum concedes an adjustment to the norm in respect of 40, Chelsea Square to 4¾%
to reflect the size of the investment. If it had not been for this concession we might have taken
the view that the particular quality of the house sufficiently off-set any unattractiveness in the
hypothetical investment due to its size, so as to make adjustment unnecessary. 40 Chelsea
Square has, in our opinion, properly been identified as a trophy house. It has the protection and
status of a Grade II* building. These factors should influence the deferment rate as well as the
capital value, because the market would, in our judgement, discount any risks of obsolescence
which are inherent in the rate which we have determined for the norm, over the 24¾ years
unexpired term. In the circumstances, however, we conclude that a deferment rate of 4¾% is
the proper rate to apply to the capital value of 40 Chelsea Square.
182. The deferment rates to be applied in the case of the lease extension at the First and
Second Floor Flat, 8, Cadogan Square and the collective enfranchisement at 55/57 Cadogan
Square should, for the reasons given above, also be 4¾%.
183. For the freehold of 9 Astell Street we apply the deferment rate of 4½%.
Deferment rate – 32 Rosary Gardens
184. Although Mr Maunder Taylor, in answer to the Tribunal, expressed his conclusion that
the agreed evidence given to the LVT that 6¼% was the correct deferment rate to be derived
from settlements down to 28 July 2003 for lease extensions was wrong, we have not been able
to accept his assessment of a higher figure based on borrowing rates.
185. We think it likely that, on the evidence which we heard and have largely accepted in the
Cadogan cases, it is too high. If one arrives at an appropriate deferment rate by the route
which we have adopted, any differential would be the result of a difference in security of the
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