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Massive blow for leaseholders in landmark case

A court of appeal has ruled in favour of landowners in a landmark case that will see hundreds of thousands of leaseholders paying over the odds for lease extensions and freehold purchases.

leaseholdA court of appeal has ruled in favour of landowners in a landmark case that will see hundreds of thousands of leaseholders paying over the odds for lease extensions and freehold purchases.

The Mundy v Sloane Stanley Estate case centred upon a flat in Chelsea with a lease of less than 23 years. The leaseholder had sought to extend the lease but was being charged £420,000 by the freeholder to do so. The astronomical figure for the extension was calculated using a valuation system that has been in place for more than 20 years – one which was devised on behalf of the Duke of Westminster and his Grosvenor Estate.

Surveyor James Wyatt of Parthenia Valuation, who led the challenge against the freeholder, argued that a new valuation model should be used – which would slash costs by almost 50%. Parthenia Valuations claimed under the current system leaseholders are being overcharged by £480 million a year.

However the Court of Appeal found in favour of the freeholder – meaning the colossal sum for extending the lease still stands. Had the ruling been in favour of Mundy, experts estimate this could have cut down the cost of lease extensions or freehold purchases across the board significantly.

Tweeting about the ruling at the time Parthenia asked: “Which is better~ the robust statistical analysis of untainted market evidence or two surveyors acting for the freeholder using an unknown method to draw a graph? If the courts cannot recognise the blatant injustice the Government must act.”

Ahead of the ruling the firm called on leaseholders to take action and contact their MPs, tweeting “Whatever the decision from the Court of Appeal, all leaseholders should email their MP to ask the Govt to ban onerous terms and to prescribe relativity according to the untainted market evidence as soon as possible.”

Paula Higgins, chief executive of Homeowners Alliance said the Court’s ruling was deeply disappointing. 

“This ruling means leaseholders will continue to hand over huge amounts to their freeholders for very little in return,” she says. “The method of lease valuation currently employed is over two decades old and is no longer appropriate. The Government must now act to ensure there is a fairer way to calculate leasehold extensions that is not subjective and favours the freeholders over leaseholders. The fight must go on.”

In a written response to the decision Louis Burns, managing director of Leasehold Solutions said: “This verdict is 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.

“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.”

Tackling unfair practices in the leasehold market?

In December, following a consultation into the sector, the government announced it would ban leaseholds on all new houses. However there was no suggestion of changes to help those people already trapped in the system. In its response to the consultation the Homeowners Alliance called for government to establish a Miss-selling Commission urgently to help those who are stuck now.

Higgins added: “The idea of freeholders being able to charge ground rent on all properties – new and old – should be outlawed completely.”

Find out more about our campaign for leasehold reform here

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