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News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
In recent years the deferment rate has become one of the main focal points for arguments in negotiating lease extension and collective enfranchisement claims.
Deferment rate is the annual discount applied on a compound basis to an anticipated future receipt to arrive at the market value of the freehold at the valuation date. In recent years the deferment rate has become one of the main focal points for arguments in negotiating lease extension and collective enfranchisement claims. There have been numerous cases where deferment rate has become an issue and the decisions of which have become binding where applicable. The most significant is the case of Earl Cadogan and Cadogan Estates Limited v Sportelli in 2006, where a deferment rate of 4.75% for houses and 5% for flats was upheld by the Court of Appeal in 2007.
The Sportelli decision was an aggregated number of appeals to the Lands Tribunal concerning Prime Central London (PCL) Leasehold Valuation Tribunal (LVT) decisions where the deferment rate was in dispute. For the first time evidence from financial experts and valuers, was relied upon in determining the deferment rate based on a formula comprising of the components Risk Premium, Risk Free Rate and Real Growth Rate.
The deferment rates set out in the Sportelli decision were set as the rates to be applied in the PCL areas and as the starting point for applications to the LVT for lease extension and collective enfranchisement claims in all other parts of the country. The Court of Appeal did not set down strict guidelines but differentiated between the precedent set for properties located within PCL and properties situated elsewhere, since the Court was required to consider the evidence focused principally upon the PCL market.
As a result, leaseholders outside the PCL area have since argued for a rate to reflect their location and have argued that the evidence determined in the Sportelli decision should be adjusted accordingly. For example, the Lands Tribunal decision of Zuckerman v The Calthorpe Estates in 2009 (also known as the Kelton Court decision), related to a block of flats in Birmingham and where a deferment rate of 6% was applied. It was determined that there is scope to argue for a higher deferment rate to reflect the greater risk of deterioration and obsolescence (+0.25%) and the prospect of lower capital growth (+0.5%) compared to PCL. Further, in all areas including PCL, there is scope to argue a higher deferment rate to reflect the increasingly onerous management burden and liability associated with flats compared to houses (+0.25%). Whilst this decision has proved it is possible to achieve a higher deferment rate, subject to producing sufficient evidence, many experts do not consider it reasonable to simply rely on this decision as a precedent outside of the region its immediately relates to, unlike Sportelli which is presently seen as the basis for determining deferment rate so the onus must be on the leaseholder to produce and successfully argue new evidence.
Jeremy Levy is a valuer at Benjamin Mire Chartered Surveyors