§ Lord Coleraineasked Her Majesty's Government:
With regard to the Housing and Urban Development Bill, whether it is considered that in the open property market, in negotiations between a reversioner wishing to sell his freehold interest in a block of flats and a nominee purchaser acting on behalf of the flat owners wishing to buy that interest, the marriage value released by the merger of interests is normally shared equally between the reversioner and the nominee purchaser; and, if so, why and whether they will publish any valuation evidence which leads to this conclusion.
§ Lord StrathclydeIt is the case that in such transactions in the open market the marriage value76WA released by the merging of interests which occurs if the landlord sells his interest to the tenants in possession is shared between them. The tenants can then grant themselves new leases or, in certain circumstances, obtain vacant possession and redevelop if they wish.
I cannot publish details of private transactions settled by agreement. But the practice in the marketplace is reflected by decisions of the Lands Tribunal in respect of sales of the freehold interest in houses. The leading cases are Norfolk v. Trinity College, Cambridge (1976, 238 EG 421) and Lloyd-Jones v. Church Commissioners for England (1981, 261 EG 471). After hearing expert evidence, it was held in both cases that marriage value should be reflected in valuations, and that, in negotiations where the parties have equal bargaining strengths, this value would normally be shared equally between tenant and freeholder.
It is the intention of Her Majesty's Government that the price paid when flats are enfranchised under the provisions of the Housing and Urban Development Bill should be calculated on this basis, but with the proviso that the freeholder's share could exceed 50 per cent. if he could show that in open market negotiations he would reasonably receive more. The Royal Institution of Chartered Surveyors agrees that the proposals follow market practice.