September 2006 Cadogan v Sportelli
Cadogan v Sportelli (also known as Arbib 2) landmark Lands Tribunal case on deferment rates to use in lease extension and freehold enfranchisement cas
Decision published 18th September 2006
• For flats new deferment rate to adopt – 5.0% (from 4.75%)
• For houses new deferment rate to adopt – 4.75% (from 4.5%)
• No adjustment for regional or local considerations
• No hope value to be applied to non participants in collective enfranchisement cases in blocks of flats
• Rate applies for leases with over 20 years remaining. For leases with less than 20 years remaining the deferment rate ‘will need to have regard to the property cycle at the time of valuation’.
• No adoption of slightly higher deferment rate if unexpired lease has over 80 years to run.
Our initial view
Leaseholders in central London (Cadogan, Wellcome, Grosvenor and Howard de Walden Estates) will be very slightly better off. Freehold owners will be very slightly worse off.
• For example £300,000 flat (long lease value) in central London on 35 year lease, nominal ground rent
o Lease extension price before Sportelli decision - £129,200.
o Lease extension price after Sportelli decision - £126,000 (a reduction of 2.5%)
However in central London leaseholders with over 80 years remaining will be slightly worse off and freehold owners will be slightly better off.
• For example £300,000 flat (long lease value) in central London on 80 year lease, nominal ground rent
o Lease extension price before Sportelli decision - £6,800
o Lease extension price after Sportelli decision - £7,900 (an increase of 16%)
Leaseholders away from central London and arguably outside London could be substantially worse off. Freehold owners could be substantially better off.
• For example £175,000 flat (long lease value) in Dartford, Kent on 65 year lease, nominal ground rent
o Lease extension price before Sportelli decision - £10,500
o Lease extension price after Sportelli decision - £14,200 (an increase of 35%)
• For example £175,000 flat (long lease value) in Dartford, Kent on 80 year lease, nominal ground rent
o Lease extension price before Sportelli decision - £1,300
o Lease extension price after Sportelli decision - £5,450 (an increase of 319%)
It will be interesting to see if Leasehold Valuation Tribunal decisions follow the Sportelli decision, particularly on the deferment rates to adopt away from central London.
Angus Fanshawe
afanshawe@dng.co.uk
Douglas and Gordon
18th September 2006