Lease Extension and The Marriage Value

Author: Tim Bishop

If you're looking to extend the lease on your property, you may or may not be aware of something known as the Marriage Value. This rather quaint sounding term can actually have quite a significant effect on your lease extension, not to mention your pocket. If you've only got a vague idea of what it means, this article will show you what the Marriage Value is, and why it should be at the forefront of your mind when making a decision on lease extension.

Any lease extension application involves a valuation. This is a rather arcane process, but the basic principle is that the freeholder of the property needs to compensated for the delay to their interest in the property. The purpose of a lease is to enable the leaseholder to live in the property for a defined term with the knowledge that when this term ends the property will revert back to the landlord. An extended lease therefore means that the landlord has to wait longer before they can take full possession of the property again, diminishing their interest in that property.

A leasehold valuation will reflect this diminished interest, by putting a value on the difference between the present and the extended lease. It will also include loss of income from ground rents for the remainder of the original term (since the whole term of the new lease will be at a peppercorn rent). All of this is quite standard, and the sort of thing that might be reasonably expected. Nevertheless things do chance if the lease term drops below 80 years.

It is at this point that marriage value will have to be accounted for. The term comes about as it is a 50:50/50 split of the value on the property if it were to be leased for another 90 years. There is no hard and fast calculation for this figure, since it's based on local property prices. Nevertheless, 90 years of generally rising property prices will obviously amount to a significant sum. Having to pay 50% of this valuation across to your landlord will significantly increase the cost of your valuation.

What you should take away from this is that it is extremely beneficial for you to extend your lease before its term drops below 80 years. Remember that the lease term is already ticking away, and you can find yourself facing this prospect surprisingly quickly. Avoiding the Marriage Value provides yet another reason for extending a lease sooner rather than later, in addition to considerations of security, property value and saleability.

Article Source: http://www.articlesbase.com/law-articles/lease-extension-and-the-marriage-value-4172837.html
About the Author


Tim Bishop is senior partner at Bonallack & Bishop. Contact them if you need a Lease Extension Solicitor who specialises in advising on extending a lease. He is responsible for all major strategic decisions, seeing himself as a businessman who owns a law firm. Tim has expanded the firm by 1000% in 12 years and has plans for its continued development.