A few weeks ago flat owners with leases with less than 80 years left to run had their hopes dashed that the premium payable might be reduced; the flat owner failed in their appeal in the case of Mundy v Trustees of the Sloan Stanley Estate. Unfortunately the tenant fell at the first hurdle in trying to show that there was a point of law to be considered; the Upper Tribunal ruled that it was open to the Tribunal at first instance as a question of fact to reject the Parthenia model.
The problem the model seeks to address is that when you calculate the value of the short lease to then base the marriage value element of the premium on you need to discount the open market sales of flats on comparable short leases to reflect the benefit of the Act as it requires that effect to be disregarded. The proponents of the model assert that the market has been distorted by the existence of the Act to a point where it isn’t possible to discount and so instead you need to look to relativity at a time when the Act didn’t colour the mark. In short the pre-Act world is the no-Act world.
When the model was tested it was found wanting below; the tenant’s counsel asserted that this flowed not from a defect in the model but because of the distortion in the market. This was rejected in favour of normal valuation methods; making appropriate adjustments to comparable is preferred even if one of the factors in pushing the market to its current position was reliance on a graph that may have been circular in its effect as it was based on settlement evidence. In short, it had an effect but it hadn’t corrupted the market and the Upper Tribunal wasn’t about to set guidance based on how the market should have operated absent that factor. So it remains the case that the Parthenia model in its current form is ruled out for future use.