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Sloane Stanley Estate v Mundy [2016] UKUT 0226 (LC) – the “hedonic regression” case

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The Tribunal goes “bong”!!!

Morgan J and Mr Trott FRICS have handed down their eagerly awaited decision as to how relativity should be assessed in leasehold enfranchisement matters.  It is something of a “doorstop” weighing in at 80 pages; so here are some brief highlights:

  • Hedonic regression as a method of analysing transactions is approved in principle
  • BUT the Parthenia model based on an analysis of 1987-91 data is rejected.  Described as “a clock which strikes thirteen”.  (Bong!)
  • Parthenia model must not be used in any future case
  • BUT existing Graphs all criticised.
  • WA Ellis and CEM Graphs “not useful”
  • Gerald Eve Graph is the “industry standard” despite its shortcomings
  • So called “Kosta averaging” of graphs was rejected
  • The preferred method of establishing relativity is not to use graphs at all.  Where there is a recent real-world sale of the lease, as there often will be, take that price and deduct for Act-rights based on experience
  • Tribunal deducted 10% for rights where there were 37-42 years unexpired on the lease.
  • GE Graph can be used as a cross check
  • An alternative method is to use the Savills 2002 enfranchiseable graph to find the real world leasehold value, and make a deduction for rights based on experience.
  • If these methods throw up different figures the lowest figure should be used because relativity must logically have fallen since both 1996 (date of the GE Graph) or 2002 (date of the Savills 2002 Graph)

Source: http://www.tanfieldchambers.co.uk/resources/articles/sloane-stanley-estate-v-mundy-2016-ukut-0226-lc–the-hedonic-regression-case

The First-tier Tribunal (Property Chamber) – Introduction of Fees

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When dealing with Leasehold Enfranchisement matters, both the Landlord and the Tenant must agree on the premium payable and the terms of the new lease or transfer. These terms must be agreed within 6 months of the Landlord serving a Counter Notice and if this is not agreed, an Application to the First Tier Tribunal must be made to prevent the matter being deemed withdrawn.

The Application is normally made by the Tenant as if they do not do this within the 6 month deadline, they will not be able to start the process of extending their lease or buying the freehold for another 12 months. This could mean incurring higher costs and paying an increased premium.

In July 2016, the Civil Proceedings, First Tier Tribunal, Upper Tribunal and Employment Tribunal Fees (Amendment) Order 2016 came into effect which introduces Application and hearing fees handled by the First Tier Tribunal (Property Chamber).

As of 25th July 2016, Application fee to the Tribunal for Leasehold Enfranchisement matters such as Lease Extensions and Freehold Purchases will be £100. A hearing fee of £200 has also been introduced which will be payable once the matter has been listed for a hearing.

The introduction of these new fees, whilst relatively low, is likely to have a knock on effect on the nature of negotiations between the Landlord and the Tenant and possibly the strategies used by each party.

For further information on extending your Lease and purchasing your Freehold contact Rebecca Mignogna on 020 8546 6630 or rebecca@arcadialaw.co.uk