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24 January 2018updated 24 Jun 2021 12:27pm

Surveyor loses “David and Goliath” case to make two million houses more affordable

Court of Appeal squashes legal challenge to leasehold costs 

By Will Dunn

The Court of Appeal ruled today against a challenge to the cost of extending the leasehold or buying the freehold of a property, in a landmark legal case that could have made an estimated 2.1m homes in the UK dramatically more affordable for their owners in the long term.

The case of Mundy v The Trustees of Sloane Stanley Estate challenged the system used to calculate the cost of extending the leasehold on a property. Had the challenge succeeded, the cost of extending a lease or buying a freehold could have fallen by as much as 50 per cent. 

Leasehold properties are those in which the land remains the property of the landowner – the freeholder – who grants a lease to the tenant. When the lease has expired, the freeholder is entitled to take possession of the property once more. The cost of extending a lease rises dramatically as the lease gets shorter.

The case centred around a small leasehold flat in Chelsea, upon which the freeholder had requested a charge of £420,000 to extend its current 23-year lease. The “relativity graphs” used to calculate this valuation were the focus of the challenge; this 20-year-old system of valuation was drawn up for the Duke of Westminster, one of the country’s biggest landowners.

The challenge was brought by surveyor James Wyatt, who told the Guardian recently that a “gravy train” of solicitors and surveyors maintains the current system in favour of landowners. The wealthiest of these landowners, including the current Duke of Westminster, would have stood to lose millions had Wyatt’s case succeeded.

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Following what Sajid Javid described as the “feudal practices” of management companies and freeholders, the government is considering banning the use of leasehold on any new-build property. But for millions of owners of older houses and flats – there are thought to be almost half a million homes in London with leases of fewer than 80 years – extending their lease or buying the land on which their home stands will remain a very expensive process. 

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