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You are here: Home / Latest News / Mundy case in Court of Appeal showdown over valuation racket

Mundy case in Court of Appeal showdown over valuation racket

January 15, 2018 //  by Sebastian O'Kelly

Chartered surveyor James Wyatt believes freeholders have been padding the costs of lease extensions by up to 50%. If his Parthenia mathematical model is accepted as valid by the courts, leaseholders could save millions of pounds when extending their leases

The Mundy case challenging freeholders’ carve-up of the lease valuations goes before the Court of Appeal tomorrow.

It is being moved by chartered Surveyor James Wyatt, of Parthenia Valuations, who believes existing valuation models, commissioned by the country’s richest freeholders, are weighted in their favour.

It has been a five-year struggle for Mr Wyatt, a former head of valuations at John D Wood, who believes the rigged lease valuation models are “leasehold’s biggest rip-off”.

The issues are reported in full on LKP here:

Property tribunal upholds lease extension ‘scandal’ that pays millions to freeholders

The Mundy case is one challenge to lease valuations; another is Justin Madders MP’s Bill capping the amount leaseholders pay for their freeholds at no more than 10 times the annual ground rent.

The Bill is scheduled to be called next month.

E&J Capital Partners ‘compelled’ to sell freehold to Taylor Wimpey house to pensioner for £38,000 (plus £4,000 costs)

Whatever its fate, it indicates that leaseholders and their MPs have wised-up to the murkiest corner of residential property where freeholders have been gaming the system to massive commercial advantage for years.

The announcement that government aims to reduce ground rents to zero in future developments was massive shock to entrenched interests in the sector.

Mr Wyatt’s victory over the Mundy case would be another.

Yesterday the Patrick Collinson, the personal finance editor of the Guardian rehearsed the issues, claiming that 2.1 million homes in England and Wales have leases less than 80 years remaining, with 490,000 in London alone.

Property market braces for shockwaves from landmark leasehold case

One of Britain’s richest men, the Duke of Westminster, could see the value of his estates plummet this week if a landmark legal challenge is successful. The case could also benefit 2m households across England and Wales.

The cost of extending the leases back to 99 or 125 years could fall by an average of 31% if the legal challenge succeeds, the Guardian claimed.

The Communities Secretary Sajid Javid said in December that the government wishes to make the lease extension / enfranchisement process “easier, faster and cheaper”, and has referred the question to the Law Commission.

Mr Wyatt told LKP that there are four options to prescribing relativity (the calculations in lease valuations).

Option One: Use the freeholders’ model

The freeholder graphs have been shown in the Mundy case to have either no market evidence or robust methodology and to have significantly overvalued the freeholders’ interest. The latest graph only has nine data points from the corrupted market and means leaseholders are overpaying by circa £480 million a year.

Option Two: Use an arbitrary theoretical graph

This has been tried by the College of Estate Management in 1997 when they could not get hold of the market evidence. It has found no support from leaseholders/freeholders/tribunals and if higher than the current graphs, freeholders will demand compensation running into tens of billions for diminution of their interests. Everyone agrees relativity must be set according to market evidence.

Option Three: Ban marriage value

Several MPs have suggested banning marriage value, but the freeholders would demand compensation running into hundreds of billions of pounds for the loss/confiscation by statute of their marriage value interest. We do not believe the Government has the funds to pay this compensation.

[LKP disputes whether this compensation actually needs paying at all.]

Option Four: the Parthenia model

Our research has been extensively peer reviewed and even the freeholders admit it is right, as they have been claiming for over 20 years the only way to determine relativity is through the pre-1993 Act market evidence (we use more market evidence than all the other graphs combined).

Consequently, adopting and prescribing the Parthenia relativity would mean no compensation to freeholders and leaseholders would have a publicly available relativity that is fair and based upon the market evidence and it would mean online calculators would be accurate, thereby making the whole process easier, quicker and cheaper.

The Government has been asked to intercede in the Mundy case by Sir Peter Bottomley amongst others (the Government has interceded in previous cases.

But even if we are successful at the Court of Appeal tomorrow this may mean another year or two to continue the judicial process which started in 2013.

The freeholders have used the court/tribunal system to their advantage in the knowledge leases continue to run down and leaseholders will continue to pay the overinflated premiums.

Related posts:

Bottomley attacks ‘uncivilised extortion’ of lease extension racket in Mortgage Solutions Court of Appeal to hear Mundy case which will save millions on lease extensions Default ThumbnailCourt of Appeal ruling on Mundy case’s ‘inconvenient truth’ expected on Wednesday Court of Appeal turns down Mundy case – unanimously DCLG shakes up leasehold team … but what about Southam, LEASE and the Mundy case, asks Bottomley

Category: Latest News, News, PressTag: James Wyatt, Mundy, Parthenia, Patrick Collinson, The Guardian

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Reader Interactions

Comments

  1. mark harrison

    January 15, 2018 at 6:24 pm

    Really hope this guy wins, he deserves it, seems like hes put a lot of hard work in ,that we maybe we can benefit from, Thanks to Him.

  2. Kim

    January 15, 2018 at 7:15 pm

    Me too. I also hope that leaseholders will attend the hearing in support of James Wyatt. It’s a shame that a protest outside the RCJ against Leassehold Extension rip off wasn’t organised to gain Maximum Media Coverage. ( Wish I had thought of it!!! )

    Let’s hope that the cheap suited, sharp shyster ground rent merchant with aspirations of becoming real life “ Barons” through their acquisitions of Ground rent find that their dreams turn to ashes on their mouths.

    Happy New Year folks. I am back in the campaign and ready for action.

  3. A Fleeced Leaseholder

    January 15, 2018 at 8:03 pm

    I have extended my lease now and I know from my own research that reducing the marriage value to zero% would be one way of reducing the cost of lease extensions for shorter leases significantly, and I see no reason why a freeholder should be compensated for what is an immoral and unjust piece of legislation. Parliament should never have approved the concept of a marriage value in the first place and the sooner it wakes up to the unjustness of the law and compensates leaseholders for paying over the odds simply to extend their leases, the sooner justice can be seen to be done. A country that works for all, not the privileged few springs to mind – or is that just wishful thinking!

    I have read the Sloane Stanley Estate v Mundy case and I can tell you, it is good for the insomnia! I wish Mr Wyatt the very best and more importantly I do hope that our dear beloved body of Parliamentarians will wake up soon and grasp hold of the unjustness of the whole leasehold system, shut their ears to vested interests, and abolish it once and for all.

    • Sophie Peach

      January 16, 2018 at 1:20 pm

      Parliament is well aware of how the system works and for whom. Extract from the latest debate in December 2017- every leaseholder ( and everyone remotely interested in a fairer society) should watch/read it. :

      Ruth Cadbury (Brentford and Isleworth) (Lab):

      “Ground rents for houses mean that people who had thought they owned their home actually own a depreciating asset. The racketeers are withholding the right to own and the right to manage. Freeholds are being sold on without notice. Links between freeholders, conveyancing solicitors and managing agents are far too close. People are having fees demanded of them on conveyancing that the solicitors did not originally tell them about, as well as fees for changes to homes, building extensions, sub-letting and so on….

      …taking homeowners for a ride, and that has to stop. We have heard about a series of things that are symptomatic of how freehold ownership has become an ​asset class in itself. Money is being made not on buying and selling, but on owning and ripping people off, … their asset value is based not on what we should think of as their core business, but on these appalling practices that we have been hearing about.”

      When I took my own case to the Tribunals I found them to be hostile and keen to bury the case under the carpet. The SRA is far too lenient on what it allows.

      However its worth noting that up util 1993, leaseholders had virtually no rights of extending their lease (thank you John Major) so things are changing. Everyone has to make the effort, become educated and contact their MP.

  4. Michael Epstein

    January 15, 2018 at 8:46 pm

    What of Roger Southam at Lease of we win?

  5. Kim

    January 15, 2018 at 8:51 pm

    Online Petition Update. January 2018
    As self appointed chief Whip for the petition to Regulate Managing Agents and Abolish Leasehold I am pleased to announce that we have in excess of 6,000 signatures which I believe exceeds the contribution to the Goverments Consultation in 2017.
    Hopefully there will soon be an end to rogue Agents:
    1. wild Overcharging
    2.Falsifying Invoices
    3.setting up and using their own companies to undertake unnecessary and expensive works of repair.
    4.charging insurance premiums where NO Insurance has been placed…….
    5.Colluding with Insurance brokers in a fraudulent way.
    6.Threatening Forfeiture when bogus bills remain unpaid.

    This behaviour leads to the serious harassment of Individual tempnants and sometimes whole communities. It cannot be allowed to continue.
    Residential Managing Agents require no more than a “ Cheap Suit” and some business cards to set up an agency and hold thousands of pounds of leaseholders money.

    MAKE IT STOP! Help put an end to the dirty tricks of spiv Agents and ground rent portfolio merchants. Please sign and share the online petition.

  6. Simon

    January 16, 2018 at 12:57 am

    We bought our flat last year with a 47 year lease and need to live in it for a year before we can extend the lease.. we borrowed the money off our parents as nobody would give a mortgage because the lease length was so low

    We live in hope that Justin Madders proposals become law

    Our surveyor says it will cost. £55000 to extend in a years time whereas if Justin Madders proposals become law we would pay just £55 (10 times £5.50)

    It’s so unfair that to keep the roof over our head we could have had to pay £55,000

  7. Paddy

    January 16, 2018 at 1:45 am

    The lease extension scandal starts early. There is no compelling reason other than naked profit why a residential lease should start at 99 years or 125 years. Nevertheless, in creating the LRHUDA 1993 Parliament was anxious to maximise any profit opportunity for freeholders at every turn:

    “Landlords will receive the full market value of their asset plus reasonable costs….there will be many occasions when it will be appropriate for the landlord to receive more —perhaps even substantially more— than 50 per cent of the marriage value.” Lord Strathclyde, Hansard, Debate 23 February 1993 vol 543 cc85-176 85.

    Their anxiety went to the extent of capitalising ‘hereby declared’ intentions in s3(4) and 4A(2) that the Act’s specific assumptions did not “preclude the making of assumptions as to other matters where those assumptions are appropriate for determining the amount of the landlord’s interest.”

    In other words, be creative.

    The central sham is the notion of “full market value”. No market applies during a lease extension. It is entirely theological. Assumptions can never be proved but nevertheless must be true and the leaseholder pays all premiums and costs. Neither so-called expert valuers or the lower/upper tribunals seem able to agree on the assumptions. That, I suppose, is the beauty of theology. Who can disprove you?

    Marriage value is just another arbitrary legal device for creating yet more profit.

    I’m not aware anyone ever cross references actual sales of extended leases post extension to see if the tribunals’ theology as applied was even close. They presumably would throw up the argument that passage of time and lack of reliable like-for-like data makes such post-analysis pointless. A vicious circle, given the courts already know they are valuing on unreliable impossible-to-test theories.

    Relativity is only one component of the scandal. Even though freeholds are often bought for less than 5% of total value, the 1993 Act fretted about:

    “…any diminution of any interest of the landlord ***in any property*** other than the tenant’s flat which results from the grant to the tenant of the new lease; and

    “….any other loss or damage which results therefrom to the extent that it is referable to the landlord’s ownership of any such interest.” (Schedule 13 (5)(1)).

    The 1993 Act bent over backwards to reward minority stake investors hoovering up freeholds.

    There is no balanced playing field anywhere in leasehold. That is the field upon which the judges will kick their latest legal ball.

  8. Kim

    January 16, 2018 at 5:41 pm

    I attended the appeal hearing today to support James Wyatt. I thought his Counsel was excellent and wish him success with his appeal. The Judges seemed very engaged by the argument put forward by Counsel.

    I staggered out of the Courtroom at 4.25pm. Whew!!!
    It continues tomorrrow but alas I am “ Washing my hair”. However I will be sending positive vibes to “Team James Wyatt”.

    • Amy

      January 18, 2018 at 7:07 am

      Hello Kim, That is wonderful that you supported James Wyatt at the Mundy Appeal. What was the general feeling? My husband and I own a short lease and our freeholders are seeking a ridiculous sum for the extension. It is more than 60% what is the read value. We are being held as hostages. This Appeal has to win for so many reasons. We are eagerly waiting for the Judgement. At the Appeal, was the magnitude of this Appeal and how it is a real public policy in the making, touched upon at the Appeal?

      • Kim

        January 18, 2018 at 9:22 am

        Amy thank you for your kind words.

        It is difficult to gage the “ General feeling” in a Court room suffice to say;

        I found the Appeal Judges most engaged by the argument put forward by “ Team James Wyatt” . In a nutshell what James in saying is that the exsisting relativity graphs are wrong and have been wrong for 20 yrs. This is proven by the research carried by “ Team James” which includes eminent mathematicians.

        It is an inconvenient truth but it is the truth. “Team James” asserted that leaseholders are effectively being fleeced by the exsisting relativity graphs which are really no more than a piece of a paper with an arbitrary line through it and which wholly benefits the freeholder and is of great detriment to the leadeholder.

        Please email your MP and ask that they adopt the Parthenia relativity graph as the accepted model. The exsisting graph is an utter travesty and a clock that strikes 13!!!! WRONG

  9. ollie

    January 16, 2018 at 9:38 pm

    Under Art 8 of EU Human Rights Act , the Government and Courts and Tribunals and Armed Forces and Housing Ministers have responsibility to protect the homes owned by its citizens. It means the Government , Courts Judges Tribunal Chairmen must stand fully behind the leaseholder current property owner and put down and kill off any challenges from so called freeholders .

    The Government taxes leaseholders on their income at 20% , 40% and 45% and charges 20% VAT on spending of many Household Goods and Services and at the end of life takes a further 40% in IHT. .

    But freeholders constituted as limited companies can clam loan interest as an operating expense against their rental income and pay very little tax on their considerably reduced profit.. Some companies get trading losses from other associated companies via British Virgin Islands like the companies run by Vincent Tchenguiz. to reduce their taxes and build up losses in their company accounts to release tax free profits. . Do the Judges in the County Courts know and understand their salary comes from the leaseholders and not from the tax dodging freehold companies.

    The Government Unit called CMA should be instructed to lance the boil called “ground rents” and declare it an “unfair contract term” in 80 year and longer leases. The Housing Minister should amend the statutory lease extension and move the marriage value payment starting point from 80 years down to 21 years .

    • Kim

      January 16, 2018 at 10:01 pm

      Let’s see what happens Ollie.

      I totally agree that the revolting pus fillled boil that is called “ Ground rents” should be lanced.

      The shiny suited shysters who operate in the murky world of ground rent portfolios should be exposed as the inadequate bottom feeders that they are. We shall see…….

      • David

        January 18, 2018 at 1:43 pm

        As a ground owner, one of many years standing, I can assure you that we are not all bottom feeders.

        In fact I take my job seriously and work with lease holders to come to a “outside the act” value for a lease renewal valuation.

        What is interesting is that this is little different to all landlords being called scum when actually the facts show that most landlords are good, 80/20 rule.

        Personally I think that if you buy a flat, with a 60 year lease, at a lower market value, because of that lower lease, then one would should not be offended when you renew the lease at a cost that only makes the property of market value.

        The question is that value of renewals should be based on sound mathematical calculation, not based on a finger in the air by the free holder or indeed at a peppercorn value that suits the lease holder.

        Fairness should be implicit. It sounds like James wishes the model to be re-designed. The question is what model is used and is it fair.

        I hope James wins, but sadly I can see him losing.

        • Charlie

          January 18, 2018 at 6:38 pm

          Thank you David
          As you will be aware the CoA is concerned with a highly sophisticated analysis of mathematical models to examine which is most appropriate for use in valuing the difference between short leases and long leases.
          Unfortunately the leaseholders commenting here are ill-informed and generally perpetuated by self-interest. They do not want to pay a fair market price. They must understand that a lease confers a temporary right of ownership for a given number of years – that is what they have and that is what they paid for. If they want to own it for a longer period they must pay the market price.

          • Kim

            January 18, 2018 at 7:56 pm

            Ha! Ha! Ha! Put a sock in Charlie boy. I own several properties (freehold included) in prime London areas. Your narrative to me is coming across as a shyster desperate for a buck. Most unedifying. Yuk … Get yourself a proper job laddie. Your days are numbered.

            Tesco area are advertising for shelf stacking . . Ask mummy if you should apply. Bless !

          • Kwaku Oduro

            January 19, 2018 at 9:00 pm

            I have a flat with 67 years left on the lease in London. I don’t mind paying the fair value for the lease extension. But the current system is too subjective. At the moment, I can not budget for the lease extension because online calculators will quote £18,000 and the freeholder will be asking for more £30,000.. What figure should I budget for ? All we are asking is system that will calculate the actual cost of extending the lease. If I know, it will cost me £40,000 in 2 years, them I can plan for it. At the moment, the cost of extending a lease depends on the freeholder. You might get a good deal with a good freeholder. A bad freeholder will screw you.

  10. John

    January 19, 2018 at 11:08 am

    OMG!

  11. Kim

    January 19, 2018 at 11:23 am

    Agent provocateur John!!

  12. Kim

    January 19, 2018 at 11:34 am

    To clarify my previous. Comment. The term is used in the “ Agitator” sense and not any other.

    Sometimes one has to choose a narrative they believe appropriate and that may flush out interesting robust debate.

  13. John

    January 19, 2018 at 11:58 am

    My ‘comment’ was in reply to your second, now deleted post in this thread, perhaps you would like to repost it and give some more information as to the source of your great wealth. No doubt long hours of ‘hewing wood and drawing water’. Must say your English grammar and spelling has improved enormously from your earlier efforts. Class!

    • Kim

      January 19, 2018 at 12:20 pm

      Wos just mucking abaht John and trying to be provocative but realised that some folks might take the comment about my extreme wealth and parities with unicorns in attendence seriously so I asked admin to delete it.

      PS If your your opinion on my English/ Grammar then I shall give it to you. Geddit?

      Now please make a useful contribution to the debate,

  14. Kim

    January 19, 2018 at 12:21 pm

    Edit

    It I want your opinion on me grammar I’ll give it yer. Geddit

  15. Kim

    January 19, 2018 at 7:40 pm

    C’ mon John John. What is your view on the Mundy appeal case? Can’t wait.

    Appen yer must ave a view- dontcha son? Actually I really would be most interested in your view of the Parhenia valuation. Did you attend the appeal court hearing? If not then request a transcript and then regale us all with your view. I await with bated breath………….sonny Jim.

    • John

      January 19, 2018 at 10:41 pm

      At this stage I don’t have a view. As I understand it Mr Wyatt is pursuing an argument that the present formula for calculating the cost of a statutory lease extension is incorrect and that an adjustment would reduce the cost to a relatively small extent. Those given the power to do so will eventually come to a decision on this and a host of ‘legals’ will be generously rewarded for arguing ‘the toss.’ In no way is this comparable to Mr Madders proposal which in many cases would make a vast difference to the cost.
      However the majority of benificiaries would be the btl. landlords who I suspect abound on this forum. Leaseholders and residents are often different people. The way to avoid the ‘scandals’ of leasehold is to refuse it!.
      To Mr Oduro I would suggest that the process of statutory lease extension is not that subjective, There is a laid down procedure with a laid down formula, the detail of which may change if Mr Wyatt wins his case. It is only when you choose the ‘ poison’ of an informal extension that the freeholder can try to offer you , and to a greater extent following leaseholders, a ‘ rubbish ‘ deal.
      Just out of interest what would be the advice given to a leaseholder with 70 years left on a 300k London flat with a £ 1200!! pa ground rent.
      As an example an identical flat in the same block with 47 yrs on the lease sold for 215 k, a third flat with 170 years on the lease presumably after a statutory extension resulting in zero ground rent? was advertised at 375k reduced to 360k and still hasn’t sold.

      • CommonSense

        January 24, 2018 at 11:44 am

        It would appear that many people, indeed on this forum, are baying for blood, so to speak.

        While I admire James Wyatt and what he is going after in terms of using figures and equations he feels are correct, there will be people who say that the system, if changed, stands to affect more than just freeholders.

        What I do not understand is this :

        So you buy a flat with 65 years left on the lease, you buy it with full knowledge of what you are buying (that is where you solicitor comes in). You will of course be buying it at a lower retail value because of this lower lease, you have basically had a good deal. Then you want the free holder to let you have a cheaper lease renewal and then you have a property worth a lot lot more.

        This is like cash for a crash … or where there is blame there is a claim.

        I own a lot of leases, they were all short (sub 62 years), I approached the free holder, agreed a figure outside the act, based on a valuation and away we went. I was happy, he was happy .. or I could have kept the flats for 62 years and taken the income off them. A choice I made. Nobody forced me to renew the leases.

        You only have to look at the comments in this forum to see that the people that want the Mundy case to succeed are of a type!

        Personally I can see no judge in their right mind giving judgement to Mundy ..

  16. CommonSense

    January 24, 2018 at 11:46 am

    Grounds rents for houses should not exist! period.

    However, the system for lease extensions on flats should stay as is. period.

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