Property market landmark leasehold case
One of Britain’s richest men, the Duke of Westminster, could see the value of his estates plummet this week if a landmark legal challenge is successful. The case could also benefit 2m households across England and Wales.
The court of appeal will on Tuesday rule in the case of Mundy v the Sloane Stanley Estate in a long-running legal battle over the calculation basis for extending a lease.
If the ruling goes in favour of Mundy, it will send shockwaves through the property industry, slicing as much as half off the cost of extending a lease or buying a freehold.
There are estimated to be 2.1m homes in England and Wales where the leases have less than 80 years remaining, with 490,000 in London alone. The cost of extending the leases back to 99 or 125 years could fall by an average of 31% if the legal challenge succeeds.
The case involves a small flat in Chelsea where the lease has fallen to under 23 years, and where the freeholder is seeking £420,000 to agree an extension.
Behind the case is the surveyor James Wyatt, who is challenging a system of lease valuation commissioned on behalf of the Duke of Westminster more than 20 years ago.
The duke’s Grosvenor estate in central London includes the freeholds to some of the most expensive property in the world, making the current duke, Hugh Grosvenor, 26, one of the richest men in Britain with a fortune estimated at £9.5bn.
At issue are the so-called “relativity graphs” used by property experts that set the value of short leases relative to the freehold. Wyatt said: “In 1996 the Grosvenor estate commissioned [the surveying firms] Gerald Eve and John D Wood to draw up graphs of relativity to set the price for lease extensions and buying freeholds. No one has had the time, effort or money to challenge them since. It’s a much bigger scandal than the ground rents issue, and a real David and Goliath battle.”
Wyatt was formerly head of valuations at John D Wood but left to set up his own consultancy, Parthenia Valuation. He argues that the mathematical models currently in use wrongly award too much to the freeholder. Read more.