The Trustees of the Sloane Stanley Estate v Mundy & ors [2016] UKUT 0226 (LC)
CBG Law were instructed by the Leaseholders in the eagerly awaited Upper Tribunal (Lands Chamber) decision on relativity within statutory lease extensions.
The Leaseholders were advancing a change to the method of calculating the premium payable to a landlord in a statutory lease extension. They relied on the Parthenia model which uses hedonic regression as a method of calculating relativity from historic sales data.
The Leaseholders also argued that the “Graphs of Relativity” produced by Gerald Eve, Savills and other surveyors that landlords’ and leaseholders’ practitioners relied upon when negotiating premiums for lease extensions had no sales data to back them up, and were merely the opinion of the individual surveyors who had created them.
After a 9 day hearing before Mr Justice Morgan and Mr Andrew Trott FRICS evidence was heard from four expert valuers, six witnesses on hedonic regression, and eight witnesses giving evidence on the origin of the Graphs of Relativity.
The Tribunal did not accept the Leaseholders’ arguments and rejected the Parthenia model as an appropriate method of calculating relativity. The Tribunal also declined to endorse the existing Graphs of Relativity.
The Tribunal determined that the preferred method of establishing relativity is not to use graphs at all, but to use a recent real-world sale, using the Gerald Eve graph as a “cross check”. An alternative method would be to use the Savills 2002 enfranchisable graph to find the real world leasehold value and made a deduction for the “Act rights” based on surveyor’s experience. Savills have since published their own relativity graph in June 2016 using hedonic regression but with their own data.