Marriage Value and Leasehold Reform Act Valuations 

You start with what you will end up with: the value of the interest to be granted, assuming vacant possession, assessed by considering comparable evidence of properties recently sold in the market.  I call this A.

The value of the freeholder’s interest is calculated by applying a formula established by precedent and reflects the freeholder’s rights to obtain vacant possession of your property at the end of the term of the lease and receive the ground rent in the meantime. 

I call this B.

The value of the existing leasehold interest will also be calculated in accordance with the Act but is not the same as the price probably achievable if the property were to be offered in the open market in its existing condition. I call this C.

Marriage value is equal to 

A – (B+C) where 

A  = vacant possession Value,

B  = freeholders current value

and   C = existing lease value.

When acquiring a lease extension or participating in a collective enfranchisement  the lessee will be required to pay the value of the freeholder’s current interest plus 50% of this marriage value.

If your particular property is subject to a headlease, and so the freeholder is not your direct landlord, the freeholder shares their 50% of the marriage value with the headlessee in accordance with the value of their respective interests.  This does not mean that the lessee has to pay more marriage value.  

If a leaseholder sells their flat without first acquiring a lease extension the market typically reflects the right to acquire such a lease, in the price they are prepared to pay, as they will benefit from the share of marriage value if they extend the term at a later date.    Specialist valuers can advise how buyers react in a given market.

If the lease has an unexpired term in excess of 80 years the 2002 Act also provides that the lessee will not pay any marriage value to the freeholder.

Tony Ford overseas advice to leaseholders provided by Cluttons and has acted throughout central London and the South East.