Letter to the Editor

Leaseholders win the battle but not the war, issue 30.

I read with interest your article on the recent decision by the Lands Tribunal in Sportelli.  Mr Goldstone is quoted as saying: "The Sportelli decision is fundamentally flawed because it applies the same 5% rate whether dealing with a flat in a prime block in Chelsea or a small flat in a deteriorating block in a suburban area".

I feel this misses the point.  All ground rents are very secure against the asset on which they are paid.  It therefore matters not whether the property is in a prime block in London or in the suburbs.  The flaw in the past has been that the percentage used for capitalisation and deferment rates have been slavishly followed from one decision to another, without taking into account what the market is doing.  Analysing ground rent sales does not, in my experienc,e show wildly different rates from area to area.  The overwhelming influence on these investments is the money market rates.  Market evidence must be brought into these valuations as far as possible.  It would be equally wrong for the rate to lock at 5% if the capitalisation rate rises.