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News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
On 10 December 2008 the House of Lords gave judgment in respect of 5 appeals known,as the Sportelli appeals. The issue raised was whether landlords are entitled to have “hope value” in the valuation of their interests under the Leasehold Reform Act 1967 (“the 1967 Act”) and the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”).
Part of the price paid by a leaseholder acquiring a new lease or the freehold, is “marriage value”. In simple terms, this is the additional value that can only be realised by the leaseholder who, in consequence of his purchase, is able to coalesce (or “marry”) his lease with the landlord’s freehold. The aggregate of the values of each separate interest is less than the value of the single merged interest. That difference is called “marriage value”. If the tenant is not in the market at the time of the sale, there will be no realisation of marriage value and the price will not include it. However, there is still the prospect, or hope, of a future sale to the tenant. This prospect of a future realisation of marriage value is called “hope value”.
Their Lordships decided:
1. Hope value exists in the real market. and is not the same as marriage value because
a. It is paid by the third party investor and not by the leaseholder
b. It forms part of the landlord’s investment value
2. Where there is an assumption that the leaseholder is not buying or seeking to buy, that excludes him from the market.
3. Hope value is subsumed in marriage value. Where marriage value is payable, hope value is not.
4. Accordingly
a. Hope value is not payable in a freehold valuation under section 9(1) of the 1967 Act – the tenant is excluded from the market
b. Hope value is not payable in a freehold valuation under section 9(1A) of the 1967 Act – the tenant pays marriage value
c. Hope value is not payable in an extended lease valuation under schedule 13 of the 1993 Act – the tenant pays marriage value, and
d. Hope value is not payable in a freehold valuation under schedule 6 of the 1993 Act in relation to the participating tenants (who pay marriage value) but is payable in relation to the non-participating tenants (who do not).
Although this appears a defeat for landlords, the reality is different. In cases where the landlord cannot recover hope value, he will receive marriage value. The inability of a landlord to recover “hope value” for non-participating tenants in a collective enfranchisement claim would have lead to considerable loss in value for landlords. Tenants would be under no incentive to enfranchise collectively except by using the minimum number of participators, avoiding hope value and minimising marriage value. This decision redresses this consequence. The result of Sportelli has been beneficial to landlords. In addition to marriage value for the participating leaseholders, landlords can recover hope value for the non-participating leaseholders. The House of Lords did not decide how hope value should be quantified. The practicality of calculation remains open for debate.