In a highly anticipated ruling that will come as a relief for freeholders, the Court of Appeal has dismissed the appeal of Adrian Mundy in his dispute with the Sloan Stanley Estate and instead ruled in favour of the status quo.
While this case itself related to one small flat in Chelsea, it had potentially groundbreaking implications for the way in which leaseholds are valued for the purpose of seeking extensions to residential leases.
Currently, leases are usually valued using a so-called ‘relativity graph’ (known as the “Gerald Eve graph”) that was first developed by surveyors for the Grosvenor Estate in the mid-1990s. This appeal sought to challenge the validity of that graph, claiming that it is outdated and inflates the value to the freeholder at the expense of the tenant, and instead proposed an alternative (the “Parthenia model”) that it was suggested could cut the tenant’s cost of obtaining an extension by up to 50%.
The Court of Appeal unanimously rejected Mundy’s proposed alternative, agreeing with the Upper Tribunal that its calculations can produce impossible results and that in future it ought not to be used in its current form. The Court instead held that the Gerald Eve graph, which is based on real-world open market transactions, remains a valid method of valuation.
The Court did, however, express concerns about the accuracy of the Gerald Eve graph and backed calls for the simplification of valuations and the potential introduction of a statutory formula – reforms which the government tasked the Law Commission to consider in December 2017.
In the words of Lord Justice Lewison, perhaps one day the “holy grail” will be found. Watch this space.
Case: Mundy v Sloane Stanley Estate Trustees  EWCA Civ 35