Landmark case could reduce leasehold extension costs

A long-running legal battle regarding how the cost of lease extensions are calculated could significantly impact the property industry.

Expected to take place in the Court of Appeal today (16/01/18), the case of Mundy v Sloane Stanley Estate could cut the price of buying a freehold or extending a leasehold if ruled in Mundy’s favour.

The case centres on a Chelsea property where the lease has fallen below 23 years. In order for the lease on the flat to be extended, the freeholder is requesting a sum of £420,000 to be paid.

Commissioned on behalf of the Duke of Westminster, the current system of leasehold valuation is now being challenged by surveyor James Wyatt.  He contests the existing way that the value of short leases relative to the freehold are calculated, something which is based on so-called “relativity graphs” by property experts.

Drawing attention to the extent of the problem, Wyatt told the Guardian: “In 1996 the Grosvenor estate commissioned [the surveying firms] Gerald Eve and John D Wood to draw up graphs of relativity to set the price for lease extensions and buying freeholds. No one has had the time, effort or money to challenge them since. It’s a much bigger scandal than the ground rents issue, and a real David and Goliath battle.”

He also went on to state that it wasn’t just those at the top of the property ladder who were being affected by the problem.

“The big London estates will be particularly hit, but it’s not just about the London market. I hear from lots of people, many of them pensioners, who are trapped in declining leases and can’t afford to extend them. For example, I know one where the lease extension should be £30,000 but the freeholders want £50,000 and the pensioners can’t afford it.”

The legal challenge Wyatt is pitching is likely to impact freeholders with high-value estates, often been derived from aristocratic land ownership. This also encompasses large charities such as the Wellcome Trust.

If Wyatt’s legal challenge is successful, the case is likely to go to the Supreme Court on appeal.

5 Comments

  • test

    Lets hope something is done, with these old out of date rules.
    I have a flat with a lease of 56 years and have been quoted £27k plus fees, plus an increase from £50 per year ground rent to £400 per year ground rent, and that’s to take the lease back up to 99 years.

    marriage value has been applied because the lease has less than 80 years left – again, another rule which is dated and unfiar to any property buyer.

  • test

    Is there any update on this if it was being heard at the court of appeal on 16th? I m about to send papers back to extend my lease and don’t want to proceed and miss out if there is going to be a reduction in the cost of doing so

  • test

    What was the outcome of the ruling?

    • test

      Hi, thank you for your comment.

      Whilst the ruling was expected to be delivered on the 16th, nothing on the outcome has since been published. We will publish this as soon as it’s been reported.

      – The TC team

  • test

    The Court of Appeal decision went in favour of Sloane Stanley Estate and rejected the Parthenia valuation model.

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