A landmark legal case, Mundy vs the Sloane Stanley Estate, is currently underway which which could have a significant impact on the cost of buying freeholds, or extending short leases on leasehold properties.
In the Mundy vs SSE case the cost of extending the lease of a small Chelsea flat is being challenged. The lease has fallen to less than 23 years and the freeholder has requested £420k to extend the lease.
Relativity Graphs are currently used by property experts to set the value of short leases relative to the freehold. Surveyor James Wyatt, founder of Parthenia Valuation, is challenging the current mathematical system of lease valuation which he said wrongly award too much to the freeholder.
Wyatt has estimated that leaseholders are currently being overcharged by £480 million a year and that solicitors and surveyors are earning huge fees upholding the current system. Wyatt followed on to say, “It’s a much bigger scandal than the ground rents issue, and a real David and Goliath battle.”
There are estimated to be near half a million homes in London alone, and over 2 million homes nationally, that have less than 80 years remaining on their leases. If Mundy is successful with his legal challenge the cost of extending leases back to 99 or 125 years could fall by as much as 50% in some cases.
Communities Secretary Sajid Javid intends to make extending a lease or purchasing a freehold, much fairer, cheaper and faster for leaseholders. Even if the Mundy case is unsuccessful, lease valuations are expected to decrease after a government review into the sector.