‘Reverse the Mundy case on lease valuations by statute if necessary’

Sir Peter Bottomley said:

I interrupt myself now to say that I was going speak for a long section on hedonic regression and Sloane Stanley Estate v. Mundy. As part of that case, Wellcome Trust interests managed to persuade an upper property tribunal of two people to make a change in the valuation of short leases, which probably lifted the apparent cost of extending leases by about 40%.

It is good for the Wellcome Trust to get good publicity for saying that it will give £1 billion to good causes—mostly medical research—this year. I do not mind its chief investment person being paid £3 million if they have lifted the capital value of the assets by 18% in the last year.

If £1 billion of those assets involves the estate that was bought from the Henry Smith Charity, which was established to help children and others with its income, and if the Wellcome Trust bought that estate because it managed to persuade people, without a public interest representative present, that the cost of enfranchisement or extension should go up so enormously, something is seriously wrong. It will take people in government and their advisers to work out what that is.

If there is an appeal against that Mundy case, I hope that the Government will associate themselves with it and try to make sure that, on the hedonic regression, the calculations go back to before the Leasehold Reform, Housing and Urban Development Act 1993, because after that Act the values were affected by what it said.

I think that James Wyatt and Parthenia Valuation are more likely to be right. I hope that the appeal succeeds, and that the Government will make sure that if it does not, the decision in the Mundy case will be reversed by statute.

I return to the issue of smaller leaseholders. If I were a small leaseholder applying either for an extension or to buy my freehold, I would find that the costs that the freeholder has could be put back on to the leaseholders, as was pointed out by my hon. Friend the Member for Poplar and Limehouse. But what about the costs to me? I have to go to surveyors and lawyers. I am new to this and I am dealing with freeholders who do this multiple times a week or a year. They are very experienced and they are often very rich.

Perhaps the Government could bring in simple graphs to cover most cases where people could ask, “Where do I stand on the graph? What is the length of the lease? What are the terms?” The Government could say, “By the way, there is going to be a cap on ground rents, so you can’t go monetising those and making the leaseholder buy them out on some prospective multiple just because the bank reference rate is very low and the apparent cost of buying them out becomes very high.”

The full debate can be seen here at 13.19: http://www.parliamentlive.tv/Event/Index/fc53bd87-8abf-4986-b7ce-6a7a488b8cfc

The debate can be read here: https://hansard.parliament.uk/commons/2016-12-20/debates/4F15110B-F6D5-4FA1-9154-536BD848130E/LeaseholdAndCommonholdReform

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