How to Avoid Adding Marriage Value to Your Lease Extension

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.

At this stage, the Marriage Value enters the equation. The term comes about as it is a 50:50 split of a notional figure, based on the potential increase in value on the property if it's leased for another 90 years. There is no hard and fast calculation for this figure, since it's based on local property prices. Needless to say 90 years of inflation in the property market will add up to a large sum. Paying over 50% of this as-yet-unrealised profit to the landlord can seriously increase the valuation of extending a lease.

The main lesson to draw from this, then, is that it is in your very best interests to extend the lease on your property before the term dips 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.

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