Landmark Leasehold Case Fails to Reduce Extension Costs
Campaigners have said they will fight on despite failing in a long-running legal court battle to cut leasehold costs.
The Court of Appeal has ruled in favour of the trustees of the Sloane Stanley Estate, which owns freeholds around London’s Sloane Square, King’s Road and Fulham Road.
The case before the court, Mundy v the Sloane Stanley Estate, centred on a small Chelsea flat where the lease had fallen to less than 23 years and the freeholder was seeking £420,000 to agree an extension.
Leaseholders Mundy said that they were being charged 50% too much for extending the lease. Campaigners were hoping that a ruling could slash as much as half from the cost of extending a lease or purchasing a freehold.
The court’s decision in favour of the Sloane Stanley Estate can be seen as a significant win for owners of freehold land.
20-year-old lease valuation system said to be ‘invalid’
The case was driven by surveyor James Wyatt, who challenged a system of lease valuation commissioned on behalf of the Duke of Westminster in 1996. Mr Wyatt had argued that the mathematical models currently used were invalid and awarded too much to the freeholder.
But lawyers acting for the freeholder said the Parthenia valuation model proposed by Mr Wyatt was now “consigned to history” and noted that “until the ‘holy grail’ for determining relativity is found, the courts and tribunals will tend to favour a valuation approach which is based as closely as possible on relevant market evidence and the application of valuation judgment and experience in applying appropriate adjustments.”
Mr Wyatt said the matter was not in his opinion resolved: “Now we need the government to act. Sir Peter Bottomley MP said that if the court of appeal did not overturn the decision, parliament will prescribe relativity by statute.”
In December, the Department for Communities and Local Government said it would be “working with the Law Commission to make the process of purchasing a freehold or extending a lease much easier, faster and cheaper.”
A ‘devastating outcome for leaseholders’
Jo Darbyshire, of the National Leasehold Campaign, had previously described the case as “a landmark moment in leasehold reform” and had hoped that if the appeal was successful “all leaseholders will benefit.”
But in the wake of the court’s ruling, Louie Burns, managing director of property management firm Leasehold Solutions, was left to describe the verdict as “an absolutely devastating outcome for leaseholders up and down the country, not just those living in prime central London. It is so disappointing to see that yet again the courts have backed the interests of wealthy freeholders.”
Mr Burns went on to say: “The court’s decision to uphold a lower relativity in leasehold valuations means that freeholders will receive even more money from leaseholders, as leaseholders will now be forced to pay more for their lease extensions to the tune of many millions of pounds.”
Legislation to let tenants sue landlords
Meanwhile, ministers are to back a law that will give tenants the legal right to challenge landlords whose properties are deemed “unfit for human habitation.”
Secretary of State for Housing Sajid Javid said:
“Government will support new legislation that requires all landlords to ensure properties are safe and give tenants the right to take legal action if landlords fail in their duties.”
“Everyone deserves a decent and safe place to live. Councils already have powers to crack down on the minority of landlords who rent out unsafe and substandard accommodation. However, public safety is paramount and I am determined to do everything possible to protect tenants,” he added.
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