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Residential lease extensions: valuations update

The update

The Court of Appeal yesterday ruled unanimously against a change in the basis upon which residential lease extensions are valued. 

In more detail

The Court of Appeal heard the case of Mundy v The Trustees of the Sloane Stanley Estate and passed down their decision on 23 January 2017. The Court heard arguments that a new formula should be used to calculate the premium payable by leaseholders when extending their leases. If accepted, this could have meant a reduction in premiums by up to 50%, particularly for leases with less than 80 years remaining to run.

The Court of Appeal ruled unanimously to dismiss these arguments, meaning that the proposed new formula will not be used on future lease extensions.

What this means for you now

The status quo has been maintained.  Your valuers should continue to value residential lease extensions using existing methodology – based on market evidence and their experience.

What this means for you in the future

The impact of this ruling could be short-lived.  Parliament is currently considering legislation to change the valuation methodology for residential lease extensions.  We anticipate those changes later this year – assuming parliamentary time can be allocated.

We also expect the process of residential lease extensions to be shortened, and costs to leaseholders to be reduced. 

How Capsticks can help

We deal with dozens of lease extensions, using both the statutory and voluntary routes, each year.  We can help you with your processes, to ensure that lease extensions are as positive an experience as possible for your residents.

For more information, please contact: Susie Rogers or Nalton Stembari.

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