(1) The Earl LCadogan (2) Cadogan Estates Limited v Cadogan Square Limited
Decision date: 21 April 2011
Neutral citation: [2011] UKUT 154 (LC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This appeal concerned the premium payable on collective enfranchisement of six flats at 38 Cadogan Square, including how to value hope (marriage) value, the effect of statutory enfranchisement rights, the caretaker’s flat rent, section 42 notice effects and the appropriate restrictive covenant. The Upper Tribunal allowed only a small hope value (5% for one flat), applied a 25% deduction to strip out the benefit of rights under the 1993 Act, reduced the caretaker’s market rent by 50% to reflect user restrictions, found the s.42 notice on flat 1 had no effect at the valuation date, adopted a 5.25% deferment rate and directed the purchaser’s form of restrictive covenant; the total premium was set at £2,212,179.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: medium
The decision indicates that hope (marriage) value, if any, must be quantified as a cautious percentage of potential marriage value reflecting a hypothetical purchaser’s likely behaviour (here a very small percentage where risk is substantial), and that a substantial deduction may be required to remove the value of rights conferred by the 1993 Act (25% in this case) when valuation evidence supports that stripping out. The Tribunal also treated user restrictions as reducing market rent for the caretaker’s flat and held that a section 42 notice may be irrelevant to value if it has no effect at the enfranchisement valuation date.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal commented (not as binding ratio) that large estate sale evidence relied upon to support high hope value was of limited weight if untested and hearsay, and noted the practical difficulty created by amended paragraph 4(2) (Schedule 6) which can produce a Catch‑22 about participating status immediately before contract, suggesting LVTs pragmatically assume status quo is maintained to contract for valuation purposes.