Valuing lease extensions became too easy until “Mundy”

Knowing what it should cost to extend your flat’s lease was until May/June 2016 fairly simple for the experts. The valuation approach was based off averaging the established relativity graphs. This put valuation on a stable platform. Flat owners could punch into a lease extension calculator the approximate value of their flat with a long lease and the calculator would output an accurate premium.

The Tribunal changed its adopted approach for assessing relativity for different lease lengths in May 2016 in the Upper Tribunal decision of Sloane Stanley v Mundy and Others.

The primary method of valuation suggested in this decision is to use real world transactions adjusted for 1993 Act rights, where sale evidence is unreliable or unavailable a comparison of the graphs and consideration of which graph ought to apply should be undertaking. The Tribunal no longer favours the commonly used method of averaging the graphs of relativity.

This decision will assist landlords to establish higher premiums and could destabilise the market for short lease sales outside of central London.

Valuation just got a whole lot more complicated.

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