In leasehold property transactions in the UK, “marriage value” refers to the potential increase in the overall value of a property when it is extended or enfranchised. This concept typically applies to leasehold properties with leases that have a remaining term of less than 80 years.
When a leaseholder extends their lease or enfranchises (buys the freehold of) their property, they may be required to pay a premium to the landlord or freeholder. This premium often includes two components: the “lease extension premium” or “freehold purchase price” and the marriage value.
The marriage value represents the increase in the value of the property resulting from the lease extension or enfranchisement. It is calculated based on the difference between the value of the property with the existing lease term and the value of the property with the extended lease term or freehold ownership. Essentially, it reflects the combined value of the leasehold and freehold interests in the property, known as the “marriage” of the two interests.
The Leasehold Reform, Housing and Urban Development Act 1993 (for lease extensions) and the Leasehold Reform Act 1967 (for collective enfranchisement) govern the calculation of marriage value in leasehold transactions in the UK. These Acts provide guidelines and formulas for determining the premium payable, including the marriage value component.
It’s important for leaseholders considering lease extensions or enfranchisement to understand the concept of marriage value and how it may impact the overall cost of the transaction. Seeking professional advice from a qualified surveyor or legal advisor with expertise in leasehold property matters can help leaseholders navigate the process and negotiate the best possible terms when dealing with marriage value.