Published by: Kevin MacDonald

Good News for Freeholders as Court of Appeal Uphold Decision Relating to Lease Extension Costs

The recent decision of the Court of Appeal in Mundy v Trustees of the Sloane Stanley Estate [2018] EWCA Civ 35 unanimously reaffirmed the Upper Tribunal’s decision when calculating premiums in connection with statutory lease extensions under the Leasehold Reform Housing and Urban Development Act 1993.

The issue considered by the Court of Appeal concerned the issue of relativity when calculating the premium payable for residential lease extensions. The Court ruled that ‘real world’ transactions can be considered and that the comparisons of leases with and without rights under the 1993 Act could also be considered legitimate in determining this issue.

Furthermore the Parthenia model which had been previously used as a tool when calculating costs for proposed premiums and which generally favoured tenants where the leases had less than 80 years to run can no longer be relied upon in future cases.

The result of this means that tenants are now likely to have to pay higher premiums when extending their leases.

Although the Parthenia model has been rejected from future use in its current form Lord Justice Lewison in his judgement acknowledged that the current methods of determining relativities which have been considered by tribunals, are not without flaws and whilst the Law Commission has been asked by the Government to consider the simplification of valuations under Act this ‘Holy Grail’ has still yet to have been found.

Whilst the exact method for calculation of valuations under the 1993 Act remains with elements of uncertainty, one thing that is clear is that if you are a tenant thinking about extending your lease or if the remaining unexpired term is approaching or below the 80 year mark then expert legal and valuation advice should be obtained as a matter of urgency.

The decision is also significant to Landlords who will need to be aware of the decision and its implications when considering offering informal lease extensions to tenants or when responding to claims under the 1993 Act.

Taylor Walton Solicitors LLP has a specialist enfranchisement team with a wealth of experience in this area and offices in St. Albans, Luton and Harpenden. If you would like to discuss any matter in connection with leasehold issues then please contact a member of our team on 01727 845245.