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Court of Appeal rules on the Trustees of the Sloane Stanley Estate -v- Mundy

24 January 2018

The Royal Courts of Justice

The long awaited ruling at the Court of Appeal on the Trustees of the Sloane Stanley Estate v Mundy was announced this morning. The appeal was lost and James Wyatt has been refused leave to appeal.

Click here for a link to the full judgement. 

Various models have been created by the major estate owners and valuation firms over the years, to calculate the price a leaseholder must pay to extend their lease. Their models have been challenged by James Wyatt, former head of valuation at John D Wood, who has formulated an alternative model known as the Parthenia model. The model was tested in Court in 2016, but was rejected then, as now. 

The most pithy summary of the original case was provided by Philip Rainey QC of Tanfield Chambers on 12th May 2016, when he wrote:

The Tribunal goes “bong”!!!

Morgan J and Mr Trott FRICS have handed down their eagerly awaited decision as to how relativity should be assessed in leasehold enfranchisement matters. It is something of a “doorstop” weighing in at 80 pages; so here are some brief highlights:

  • Hedonic regression as a method of analysing transactions is approved in principle
  • BUT the Parthenia model based on an analysis of 1987-91 data is rejected. Described as “a clock which strikes thirteen”.  (Bong!)
  • Parthenia model must not be used in any future case
  • BUT existing Graphs all criticised.
  • WA Ellis and CEM Graphs “not useful”
  • Gerald Eve Graph is the “industry standard” despite its shortcomings
  • So called “Kosta averaging” of graphs was rejected
  • The preferred method of establishing relativity is not to use graphs at all. Where there is a recent real-world sale of the lease, as there often will be, take that price and deduct for Act-rights based on experience
  • Tribunal deducted 10% for rights where there were 37-42 years unexpired on the lease.
  • GE Graph can be used as a cross check
  • An alternative method is to use the Savills 2002 enfranchiseable graph to find the real world leasehold value, and make a deduction for rights based on experience.
  • If these methods throw up different figures the lowest figure should be used because relativity must logically have fallen since both 1996 (date of the GE Graph) or 2002 (date of the Savills 2002 Graph)

Estimates vary but some claim there are over two million leases with less than 80 years to run. This ruling will inform the price a huge number of leaseholders will pay their freeholders to have their lease extended.

 

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