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Sloane Stanley Estate v Mundy [2016] UKUT 0226 (LC) – the ‘hedonic regression’ case

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12th May 2016

The Tribunal goes “bong”!

Morgan J and Mr Trott FRICS have handed down their eagerly awaited decision as to how relativity should be assessed in leasehold enfranchisement matters. It is something of a “doorstop” weighing in at 80 pages; so here are some brief highlights:

• Hedonic regression as a method of analysing transactions is approved in principle.
• BUT the Parthenia model based on an analysis of 1987-91 data is rejected. Described as “a clock which strikes thirteen” (Bong!).
• Parthenia model must not be used in any future case.
• BUT existing Graphs all criticised.
• WA Ellis and CEM Graphs “not useful”.
• Gerald Eve Graph is the “industry standard” despite its shortcomings.
• So called “Kosta averaging” of graphs was rejected.
• The preferred method of establishing relativity is not to use graphs at all. Where there is a recent real-world sale of the lease, as there often will be, take that price and deduct for Act-rights based on experience.
• Tribunal deducted 10% for rights where there were 37-42 years unexpired on the lease.
• GE Graph can be used as a cross check.
• An alternative method is to use the Savills 2002 enfranchiseable graph to find the real world leasehold value, and make a deduction for rights based on experience.
• If these methods throw up different figures the lowest figure should be used because relativity must logically have fallen since both 1996 (date of the GE Graph) or 2002 (date of the Savills 2002 Graph).

Click here to be taken to the full decision.

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