Leaseholders Win The Battle, But Not The War - Sportelli Decision
The recent decision by the Lands Tribunal (known as the Sportelli Decision) has adjusted the cost for leaseholders of buying a 90-year lease extension or the freehold interest in their property. The Tribunal decided a deferment rate of 4.75% should be applied to houses and 5% to flats irrespective of their location. The background to this was the ‘Arbib Decision’ published by the Lands Tribunal in September 2005, which devalued leasehold properties through the reduction of deferment rates to 4.5% for a prime London house and 4.75% for a flat.
Prior to Arbib, deferment rates had been 6% and 6.5% respectively. A lower deferment rate increases the cost of buying a 90-year lease extension or the freehold interest in a property.
David Goldstone MRICS of John D Wood & Co. said, “The Sportelli decision is fundamentally flawed because it applies the same 5% rate whether dealing with a flat in a prime block in Chelsea or a small flat in a deteriorating block in a suburban area. This 0.25% increase has effectively swung the pendulum back in a small way in favour of all leaseholders, by reducing the cost of buying a lease extension or the freehold of a property. However, leaseholders benefited more prior to the Arbib decision from higher deferment rates in excess of 6% and therefore a much lower cost. Taking the full effect of both the Sportelli and Arbib decisions into account, the freeholders have scored a major victory in increasing the cost of buying a lease extension or the freehold.”
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