What is marriage value in a lease extension?

Full answer

Marriage value has historically been one of the most expensive and least understood elements of extending a short residential lease, and understanding it explains why leases dropping below 80 years remaining could become dramatically more costly to extend. **Why marriage value exists** A flat with a very short lease (say, 60 years remaining) is worth noticeably less on the open market than an identical flat with a long lease (say, 999 years), because buyers and mortgage lenders are wary of the diminishing value and reduced mortgageability as a lease gets shorter. When the lease is extended, the property's value jumps back up towards what a long-lease equivalent would be worth -- this jump in value is the 'marriage value', reflecting the fact that combining ('marrying') the leaseholder's interest with an extended lease term creates more combined value than the separate short lease and freeholder's reversion interest were worth beforehand. **The old 80-year rule** Under the previous statutory lease extension formula (before the 2024 Act reforms), if a lease had 80 years or more remaining at the time of the extension claim, no marriage value was payable at all -- the premium was based only on the ground rent value and reversion value. But once a lease dropped below 80 years remaining, marriage value became payable, split 50/50 between the leaseholder and the freeholder, which could add a very substantial amount to the extension cost, particularly for leases that had fallen to considerably fewer years. **Why this created a cliff-edge problem** Because marriage value only applied below the 80-year threshold, and because the shorter a lease became, the larger the marriage value uplift tended to be, leaseholders whose lease dropped just below 80 years could face a disproportionately large jump in extension costs compared with extending just before hitting that threshold -- this created a strong financial incentive to extend a lease before it fell below 80 years, to avoid the marriage value charge altogether. **The 2024 Act abolishes marriage value** The Leasehold and Freehold Reform Act 2024 removes marriage value from the statutory lease extension (and freehold purchase) calculation entirely, regardless of how many years remain on the lease. This is expected to make extending very short leases substantially cheaper once the relevant provisions are brought fully into force, since the often-largest cost component of a short lease extension will no longer apply. **Freeholders and pension funds affected** This change has been controversial among some freeholders and investment funds that hold ground rent and reversion interests as an income-generating asset, since removing marriage value reduces the compensation they receive when leases are extended -- some freeholder groups have raised legal challenges regarding compatibility with human rights property protections, so the exact final position may continue to evolve. **Practical tip** If your lease is approaching or below 80 years remaining, get up-to-date advice from a specialist leasehold valuer about whether to extend now under the current rules or wait for the 2024 Act's marriage value abolition to be implemented, since the timing could significantly affect your total cost.

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More answers

• How much does it cost to extend a lease under the 2024 Act?
• How does the Leasehold and Freehold Reform Act 2024 affect ground rent?