A Landmark Decision –

21 March 2018

Adrian Howard Munday v The Trustees of the Sloane Stanley Estate

On 24th January 2018 the Court of Appeal made a landmark ruling in the case of Adrian Howard Munday v The Trustees of the Sloane Stanley Estate.  In spite of sustained legal arguments by the Appellant, it was ruled that the Gerald Eve model of relativity can continue to be used to calculate the payable premium for lease renewals pursuant to the Leasehold Reform and Urban Development Act 1993 ("the Act"). 

This decision upholds the previous ruling made by the Upper Tribunal (Lands Chamber) on 10th May 2016.

The decision has caused much controversy within the leaseholder community given that it was hoped that an alternative method of premium calculation would be sanctioned by the Court, which in turn was expected to significantly reduce the cost of leasehold renewal premiums. The method of valuation proposed by the leaseholders was the "Parthenia" model as devised by James Wyatt of Parthenia Valuations.

The Parthenia model of valuation uses a technique called "hedonic regression valuation", which is claimed to isolate the effect of the lease length in respect of the value of the property. This essentially means that lease renewal premiums are calculated without reference to the Act, as the data used to formulate the calculations pre-dates 1993.

This technique was applied by the Appellants to argue a higher and more accurate relativity, and therefore a lower lease premium.

The Court of Appeal rejected the Parthenia model because they held it to be nonsensical and absurd upon application ("a clock that strikes thirteen"). They found that when the model was applied to determine the value of a property without Act rights, it provided a figure in excess of the actual market value. The comparison was held to be illegitimate. The model was subject to sustained criticism and was ruled to be a completely inappropriate method of leasehold valuation. It was held that the Parthenia model must not be used in future valuations.

Interestingly the Court of Appeal also refused to give unqualified endorsement to any of the relativity graphs currently available on the market for the purposes of leasehold extension valuation. They did however accept the ongoing use of the Gerald Eve relativity graph as the best available option at the current time, in spite of concerns raised by the Upper Tribunal regarding its reliability and current applicability.

In giving judgement for the Respondent, the Court of Appeal appears to have quashed the hopes of leaseholders everywhere campaigning for lower leasehold extension renewal premiums.  It could even be argued that the judgement somewhat serves to sustain accusations levelled at the Government that there is an ongoing failure to tackle unfair practices in the leasehold market.

Controversy around the judgement is also fuelled by the fact that many leaseholders believe that the Law is formulated to protect the interests of freeholders to their disadvantage. It is therefore somewhat unfortunate that the decision in this case fails to undermine or challenge this perspective in any way. 

Despite this, leaseholders may be reassured by news that the simplification of valuations and the valuation of leasehold extensions will be included in the Law Commission's 13th Programme of Law Reform as launched on 14 December 2017. This programme means that it is not altogether impossible to envisage an effective realignment of the status quo between freeholders and leaseholders at some point in the near future.

The question is, how long will this take, and where will the detriment fall in the meantime.

This is not legal advice; it is intended to provide information of general interest about current legal issues. 

If you require advice on any commercial or residential dispute matter please contact us on 01245 493939