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Leasehold extension costs remain the same … for now.

There was a setback for leaseholders this week as the Court of Appeal refused a leaseholder’s claim that the cost of extending residential leases should be reduced. The claim was brought by an individual, Mr Mundy, (who was backed by leading valuation surveyor, James Wyatt) against heavy weight London land owners, the Slone Stanley Estate.

The basis of the challenge by Mr Mundy was that the current system of valuing how much a leaseholder should pay to their landlord to extend their lease or purchase the freehold was weighted too heavily in favour of the landlord and in some cases meant that some leaseholders could simply not afford to extend their lease; in this case Mr Mundy, who’s lease only had 23 years left to run, was being asked for £420,000 by his landlord to agree an extension to the lease of his Chelsea flat.

The technical basis of the claim was that Mr Mundy argued that there should be a shift away from the “relativity graph” method by which surveyors currently value short leases relative to the freehold to a system based on the ‘Parthenia model’ which attributes a higher value to the existing lease.

Campaigners had hoped that if the decision had gone in favour of Mr Mundy, then the costs of extending a residential lease or purchasing the freehold to a lease could be reduced by up to 50%, making the process far more palatable for leaseholders across the UK. Conversely, had the Court of Appeal backed Mr Mundy, then this would have had disastrous consequences for the value of landlord’s assets, stripping millions from the value of some of the big property estate’s portfolios.    

On this occasion the big guys won, meaning that the status quo in respect of valuing leasehold property remains.  

However, the decision in the Court of Appeal does not appear to be the end of this matter, it is assumed that this decision will be appealed to the Supreme Court and it would appear that government is also keen on reform for leaseholders; commenting in December 2017 the Department for Communities and Local Government stated 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”. Watch this space!

If you would like to discuss extending your lease or purchasing the freehold to your property, then please contact our Property Litigation expert Richard Glover on 0161 828 1851 or on Richard.glover@jmw.co.uk.

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