Leaseholders lose court fight to cut cost of extending leases

Leaseholders have lost a court battle to stop paying thousands of pounds to extend leases and purchase freeholds. The Court of Appeal instead ruled that freeholders, including Britain's wealthiest man, the Duke of Grosvenor, can continue to use the current system.

A challenge had been raised by surveyor James Wyatt of Parthenia Valuation against the decision by the Sloane Stanley Estate in London's Chelsea area to charge a leaseholder £3420,000 to extend the lease beyond its remaining 23 years.

In Mundy v Sloane Stanley Estate, Mr Wyatt had argued that the current valuation model is out of date and that a new statistical system, known as the Parthenia model, should be introduced that would reduce leasehold extension and freehold purchases by up to 50 percent.

The Court of Appeal dismissed the challenge and the current system - devised by surveyors working for the Duke of Grosvenor - but noted that the Law Commission is actively considering how to simplify valuations under the Leasehold Reform, Housing and Urban Development Act 1993. Delivering their judgment, Lord Lewison said: “It may be, therefore, that the Holy Grail will one day be found.”

The decision is a bitter blow to leasehold reform campaigners who have been battling for changes to the system for several years. Paula Higgins, chief executive of the Homeowners Alliance, described the ruling as “deeply disappointing”.

She added: “This ruling means leaseholders will continue to hand over huge amounts to their freeholders for very little in return. 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.”

Leasehold reform has also caught the attention of the government. Last year Housing Minister Sajid Javid announced a ban on selling newbuild homes with leasehold.

Leaseholders do not own the land on which their property stands. Instead they negotiate a lease with the freeholder that usually lasts for decades. The Court of Appeal case focused on what happens when the lease is close to expiring and the leaseholder wants to extend or buy the freehold.

In the current system, property surveyors use “relativity graphs” to set the value of the lease. The system was designed by surveying firms working for the Grosvenor Estate, which includes some of the most expensive areas of London including Mayfair and Belgravia. In London alone, there are currently almost 500,000 flats and houses with less than 80 years left on the lease.

If you're buying a leasehold property, get the right legal advice from the start. Contact Homeward Legal on to find out more.