How much should a leaseholder pay for a lease extension? That was the question at the heart of an appeal heard last week in the Royal Court of Justice. Surveyor James Wyatt challenged the current methods of valuation as inaccurate and favouring the freeholder.
In the original case of Mundy v The Trustees of Sloane Stanley Estate in 2016, the extension of a 23-year lease on a Chelsea flat was valued at £420,000. The figure was arrived at using a set of relativity graphs favoured by lawyers and surveyors.
Enter James Wyatt, a courageous surveyor who has developed his own valuation model which he argues is based on more robust maths, better data, and extensive peer review. But the inconvenient truth for freeholders is that Wyatt’s model produces lower valuations.
This would gave been great news for us as leaseholders, but not so good for freeholders. If successful the case would have reduced the revenue of some of the most powerful property interests in Britain. Perhaps unsurprisingly Wyatt’s model was thrown out in 2016, and again last week.
The verdict will further ignite calls for statutory leasehold reform. Only last month DCLG Minister Sajid Javid admitted that leasehold is feudal and in urgent need of reform. It shows how out of touch judges are with the real world and the current housing crisis when after seven years of austerity they can mandate a transfer of wealth away from ordinary home-owners to some of the country’s wealthiest individuals and corporations. And let’s not forget that most corporate owners of UK leaseholds are registered in offshore tax havens.
Leaseholders now need to call for a statutory reversal of this ruling. Justin Madders MP has called for a cap on the cost of buying a freehold at ten times the ground rent and a simple formula that will reduce the need for surveyors. The second reading of this bill is on 2nd. February.