Court ruling on leasehold extensions a blow to reform campaigners

Leasehold reform campaigners are licking their wounds after a court ruled against their move to cut the cost of leasehold extensions and freehold purchases. Instead the Court of Appeal said the current system must stay in place – at least until the Law Commission reports on its plans to simplify valuations.

Surveyor James Wyatt of Parthenia Valuation had challenged a ruling by the Upper Tribunal that backed a Chelsea-based property company’s decision to charge a London leaseholder £420,000 to extend their lease beyond its remaining 23 years.

In Mundy v Sloane Stanley Estate, Mr Wyatt argued that a new statistical system, known as the Parthenia model, should be introduced to bring more fairness to the system and reduce the costs of extending leases and buying freehold by up to 50 percent.

However, the Court of Appeal dismissed the challenge while noting that the Law Commission, directed by the Government, is currently examining how to simplify valuations under the Leasehold Reform, Housing and Urban Development Act 1993.

Vowing to fight on

Delivering the Court of Appeal’s judgment, Lord Lewison said: “It may be, therefore, that the Holy Grail will one day be found.”

Leasehold reform campaigners have vowed to fight on after the ruling. Paula Higgins, chief executive of the Homeowners Alliance, said the ruling was “deeply disappointing” and meant leaseholders would continue to “hand over huge amounts” for “very little in return”.

She added: “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.”

Mr Wyatt agreed, saying: “Now we need the government to act.”

A ‘feudal’ system

Housing Minister Sajid Javid has described the leasehold system as “feudal” and he condemned “unfair and abusive practices” when he announced in December that he is to introduce legislation to ban the sale of newbuild homes through leasehold. Ground rent on new long leases for houses and flats is also to be set at zero.

In leasehold, a freeholder owns the land on which a property stands. The leaseholder negotiates a lease that usually lasts for decades, but when the lease nears an end, many freeholders have imposed onerous new terms. The Court of Appeal case focused on what happens when the leaseholder wants to extend or buy the freehold.

The current system was designed by surveyors working for the Grosvenor Estate, which covers some of London’s most exclusive and expensive areas. There are around 4.1 million leasehold properties in England and Wales with around 2.1 million with less than 80 years left on the lease. Of those, around 500,000 are in London.

When you’re buying leasehold, it’s essential to have the right legal advice from the start. Best Value Conveyancing only works with a panel of expert property solicitors who will look after your interests so you’re not hit with a huge bill in years to come. Call Best Value Conveyancing now on 08000 387 007.