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No change to the status quo

The Court of Appeal, in the case of Mundy v Trustees of the Sloane Stanley Estate [2018] EWCA Civ 35, delivered a much anticipated judgment on 24 January 2018 in respect of the method of valuing the premium payable by leaseholders for a lease extension pursuant to the Leasehold Reform, Housing and Urban Development Act 1993 (‘the Act’).

The premium is made of three parts: the diminution in value of the landlord’s interest in the flat consequent on the grant of a new lease; the landlord’s share of marriage value; and compensation for any other loss that the landlord will suffer as a result of the grant of the lease. The decision concerned the calculation of the second element of this calculation.

The leaseholder had argued at first instance, before the Upper Tribunal, for the use of a model known as the “Parthenia model”. The Tribunal had rejected the use of this model, amongst other things, on the basis that it had produced an impossible result. The leaseholder appealed to the Court of Appeal.

Unfortunately for leaseholders, the Court of Appeal rejected the arguments put forward for a new valuation model. Lewison LJ held that the Tribunal was entitled to reject the use of the Parthenia model in future on the basis of the evidence at had been presented at the hearing.

That would appear to be the end for the Parthenia model, although the leaseholder can seek permission to appeal to the Supreme Court from the Court of Appeal. However, the question of valuation of the premium payable on a lease extension is a hot topic, with several leaseholders sitting on diminishing leases. The Law Commission has been asked to consider this topic by the Government, with a view to simplifying valuations under the Act. This will no doubt be hotly contested by landlords and leaseholders who have already extended their lease.

Watch this space.

This article is for information purposes only and is not legal advice. It should not be acted or relied upon and legal advice should be sought before applying any of the information in this article to any facts or circumstances.

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