The claims involved the valuation of premiums under the Leasehold Reform Housing and Urban Development Act 1993. The UTLC listed three applications for the specific purpose of considering the validity of a hedonic regression model (“the Parthenia model”) to determine leasehold relativity. The Tribunal indicated the approach to be adopted for assessing relativity for different lease lengths and commented on the use of published relativity graphs.
This is an exceptionally important decision. Although not specifically stated to be a ‘guideline’ case, valuers should follow the approach to leasehold relativity suggested by the UTLC. The primary method of valuation suggested (i.e. a real world trascation adjusted for Act rights) is in a sense an easy one, although opinions may well differ on the value of ‘Act rights’. The secondary method (i.e. a comparison of graphs) relies on a selection of the appropriate graph as well as an assessement of ‘Act rights’. Some graphs were praised (especially Savills Enfrancshisable and Gerald Eve) but the Tribunal did not specifically reject the use of others. However, the Tribunal did not favour the commonly used method of simply averaging graphs of relativity.
Source Tanfield Chambers