Voyvoda v Grosvenor West End Properties [2014] L&T.R. 10
The End of the Zuckerman Addition
1.1 Previous authority (such as City and County Properties v Yeats [2012] UKUT 227 (LC); [2013] R.V.R 47 had held that the so called ‘Zuckerman[1] addition’ (the 0.25% addition to the Sportelli[2] rate to reflect the additional management risk for flats did not need to be applied in a situation where there was likely to be no or little management risk to the freeholder (such as a case where there is a third party management company).
1.2 In this case, heard by the Upper Tribunal (Lands Chamber) concerned a substantial (circa £4M) lease extension on the Grosvenor Estate. The landlord successfully argued that notwithstanding the management ‘risk’ associated with owning the reversion to flats and the burdens placed on the landlord by the service charge regime both under the Commonhold and Leasehold Reform Act 2002 and under the Service Charges (Consultation Requirements) (England) Regulations 2003 (‘the 2003 Regulations’), that it was no longer appropriate to make the Zuckerman addition.
1.3 This was because of the decision of the Supreme Court in Daejan v Benson [2013] UKSC 14 which determined that the power to dispense with the consultation requirements under the 2003 Regulations was to be exercised in a proportionate manner to achieve a balance between the parties, so as to avoid the tenants receiving a windfall because of the refusal of the court to exercise such dispensation, but also to ensure that landlords do not become slipshod in their approach to service charge consultation. Accordingly, the risk to the owner of a well-managed reversion was reduced and there was no longer any basis for making the Zuckerman Addition.
MARK CHICK
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