Glyn Crews continues his analysis of the effect a recent Court of Appeal ruling has had on residential leases and freeholders
In the first part of its judgment regarding the Sportelli appeals (see Pt 1), the Court of Appeal concluded that in valuing the freeholder's loss caused by the exercise by flat owners of their collective right to purchase (enfranchise) their freeholds or their individual right to extend their leases by 90 years (simultaneously reducing their ground rents to a peppercorn) hope value was to be disregarded. Hope value is the price an open market buyer would be prepared to pay for the hope that before the lease expires the flat owner will exercise his rights under the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993) and the freeholder will receive 50% of the marriage value (the increase in the value of the flat following the enfranchisement or lease extension).
Save for a handful of properties, this decision will have an insignificant effect.
