Lease Extension and Enfranchisement Specialists
020 7499 8043 | 0800 470 1117 | firstname.lastname@example.org
The Law Commission has rejected the most radical proposals for reform which included a multiplier of the Ground Rent or a percentage of the capital value. Whilst simple to implement and result in huge savings to leaseholders, the arbitrary results that it produced would be likely to result in a successful Human Rights Challenge by freeholders..a so called AP1P challenge (Article 1 of the First Protocol), which protects the right to the peaceful enjoyment of possessions.
However, they provide 15 options to reform the current valuation basis for the government to consider.
The most radical known as Scheme 1, abolishes marriage value, which is likely to result in huge windfalls for leaseholders with unexpired terms at 80 years and below. Considered to have almost a 50% to a AP1P challenge.
Scheme 2 reduces marriage value to "hope value". Again, large windfalls for leaseholders with unexpired terms at 80 years and below.
Medium to low risk of a AP1P challenge.
Scheme 3 is basically no change to existing system.
It’s the 10th Anniversary of the publication of this much maligned Report and it seems appropriate that on this “not” so auspicious occasion, we should stand back and review it.
The reason for the research was to establish the basis for estimating “Marriage Value”, 50% of which is payable to the Landlord by leaseholders in Statutory Lease Extensions, when the unexpired lease terms are 80 years or under.
“Marriage Value” is the enhanced value created when 2 interests are merged or partially merged. This happens when the sum of the whole thing is greater the sum of its parts.
Gilbert and Sullivan words could be describing the "Paradox" facing the Law Commission's Terms of Reference which seeks to satisfy opposing interests:
"set out the options for reducing the premium payable by existing and future
leaseholders to enfranchise, whilst ensuring sufficient compensation is paid to
landlords to reflect their legitimate property interests;"
in addition, they have been asked to
“produce options for a simpler, clearer and consistent valuation methodology; and
make enfranchisement easier, quicker and more cost effective (by reducing the professional costs),
particularly for leaseholders, including by introducing a clear prescribed methodology for calculating the premium......
Words by Bob Dylan but could this sentiment be also attributed to the radical proposals laid out by The Rt Hon Lord Justice Bean, Professor Nicholas Hopkins, Stephen Lewis, Professor David Ormerod QC and Nicholas Paines QC, the Law Commissioners, who have recently published two consultation papers on Leasehold Reform:
Could we now be closer to helping Lord Justice Lewinson achieve his dream that “The Holy Grail will one day be found” as he called for in the Court of Appeal case of Adrian Howard Mundy v Trustees of the Sloane Stanley Estate  EWCA Civ 35?.........
In the words of Bob Geldof and Boomtown Rats and no doubt a few poor leaseholders in their million-pound flats up and down the Kings Road:
“I don’t like Mundy” or something like that.
However, there may still be a glimmer of light at the end of the tunnel, as suggested by Lord Justice Lewinson’s plea that hopefully
“The Holy Grail will one day be found”, in the recent Court of Appeal case of Mundy v Sloane Stanley (2018).
It is now even clearer than before, that when considering a method to find the relativity, the courts will consider that market transactions are at the top of the hierarchy of evidence, followed by graphs. This poses a major challenge for valuers as short lease sales evidence is sparse and maybe tainted.”.........
Following Lord Justice Lewinson’s plea that hopefully “The Holy Grail will one day be found” in the recent Court of Appeal case of Mundy v Sloane Stanley (2018), we have set about trying to find a graph that will hopefully satisfy both Leaseholders and Freeholders alike in the absence of short lease sales evidence.
The original Upper Tribunal Decision found favour with the Gerald Eve Graph (“industry standard”) and both Savills 2002 and Savills 2015. As part of that decision and on several cases after that decision there has generally been a view that relativities have fallen since the graph was formulated: “One of the concerns that the UT had about the reliability of the Gerald Eve graph was that because the relativities shown by that graph had not changed since the graph was first compiled, it no longer reflected relativities as they were in 2014. Structural changes in interest rates and rates of investment returns, changes in the nature of the market such as an influx of foreign buyers, and changes in the institutional and legal structure of the residential market all suggested that the Gerald Eve graph overstated the relative value of a lease by comparison with the value of a freehold. These concerns were summarised at  to  of Appendix B to the UT’s decision and reiterated in Appendix C at .”.........
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