A small flat in Chelsea is at the centre of a property storm that could lead to thousands of pounds being shaved off the cost of extending a lease.
The flat in one of London’s most affluent areas has only 23 years remaining on its lease but the freeholder has requested £420,000 for an extension.
Behind the case is chartered surveyor, James Wyatt, who has challenged the way leases are valued, using so called ‘relativity graphs’. The case, Sloane Stanley v Mundy and others, has now made its way to the court of appeal and will be heard today (16 January).
Wyatt comments: “In 1996 the Grosvenor estate (owned by the Duke of Westminster) commissioned 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.
The big London estates will be particularly hit, but it’s not just about the London market. I hear from lots of people, many of them pensioners, who are trapped in declining leases and can’t afford to extend them. I know of one where the lease extension should be £30,000 but the freeholder wants £50,000 and the pensioner can’t afford it.”
The Mundy case found that the graphs relied upon by freeholders significantly overvalues the freehold, meaning that for the last 20 years or so, leaseholders have probably been overpaying by as much as 50 per cent when they extended their lease or bought the freehold.
Any leaseholder with a lease of 80 years or less should be particularly interested in the outcome of this case.
Properties with short leases, that is anything less than 80 years, are far more difficult to sell and where the lease has less than 70 years to run, it can be particularly difficult, if not impossible to obtain a mortgage.
Throughout England and Wales, there are around 3 million people living in 2 million properties where the lease is less than 80 years; 490,000 of these being in London.
Author: Gail Harris