Cravecrest Limited v Duke of Westminster (1) and Vowden Investments Limited (2) [2012] UKUT 68 (LC)

This case concerned the acquisition of an overriding lease, in which Thomas acted for the Nominee Purchaser (NP). At the date of the s13 Notice the qualifying leases only had a few days unexpired. The two principal interests to be acquired were an overriding lease (the ORL) of one flat, owned by Vowden, and the “Escalator” leasehold interest owned by Grosvenor Estate Belgravia. The VP value of the building as flats was £4.95m, but as a house it would be worth £7m. The main issues on appeal were whether that development hope value could be claimed at all, and if so how it should be valued. As a preliminary issue Vowden sought to argue that the ORL could not be claimed at all, as by the date of the hearing it was in possession, and the ORL was no longer a superior lease which was liable to acquisition. The parties had agreed that the ORL was liable to acquisition, but Vowden sought to argue that since any such agreement was expressed to be “subject to contract” by statute, it could change its mind. Thomas argued, and the Upper Tribunal accepted, that Vowden could not withdraw from that agreement. On the main legal issue, Thomas argued the Grosvenor lease and ORL had to be valued separately, and that it was not permissible to have regard to the possibility of a deal between the purchasers of them to turn the property back into a house, relying on the decision in Sportelli. The Upper Tribunal rejected the appeal on this ground, holding that although it was to be assumed that the owner of other interests in the building were not in the market to buy another interest, there was nothing in the statute or Sportelli which precluded that assumption that they were in the market to sell their interest. On that basis, a question arose as to what assumptions could be made about what enquiries the purchaser of one interest had made of the owner of the other interest prior to the hypothetical sale. It was held that it could not be assumed that an agreement was in place, but it could be assumed that the purchaser had made such enquires as would a prudent purchaser, and that he had received appropriate responses.