Court Ruling Leaves Leasehold System Intact – For Now
By Scanlans partner, Andrew Holmes
The Court of Appeal recently delivered a blow to leaseholders but a fillip for freeholders with an eagerly-awaited ruling in a landmark legal battle.
The case of Mundy v The Sloane Stanley Estate involved a small flat in Chelsea which had under 23 years remaining on the lease. The freeholders had offered to extend the lease for £420,000.
Surveyor James Wyatt, acting for the leaseholder, argued that the current mathematical model wrongly favours freeholders, and he proposed a different method of calculating a leasehold extension.
However, he failed to convince the Court of Appeal of his case and so, for now, the existing method will continue to be adopted by valuation surveyors throughout the country.
The current method of calculation, in place since the mid-1990s, involves relativity graphs which help surveyors to assess the value of a lease over a given period, relative to the freehold.
It’s a practice that is widely accepted in the industry.
With the status quo maintained, it is good news for freeholders but bad for leaseholders. This is because freeholders will achieve higher sums than they would have under Mr Wyatt’s proposal.
The ruling is estimated to impact on more than two million households in England and Wales, but it may not be the end of the story.
There have been suggestions that the government may at some stage try to alter the legislation or that a new method of valuation will emerge.
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