What’s Marriage Value and What Impact Leasehold and Freehold Reform Act 2024 Has on It?

Marriage Value:

• Definition Today: When the lease length falls below 80 years, “marriage value” becomes applicable. Marriage value is the potential increase in the value of the property that occurs when the lease is extended. The law requires that the freeholder (landlord) shares this increase in value with the leaseholder (you).
• Impact Today: As a result, the cost to extend the lease will increase significantly compared to extending it with a lease term of 80 years or more. Typically, the freeholder is entitled to 50% of the marriage value.

Based on the latest information from the Leasehold and Freehold Reform Act 2024 and the proposed Leasehold and Commonhold Reform Bill, here’s what to consider if you’re waiting for the abolition of marriage value before extending your lease:

1. Timeline for Reforms:

• Current Situation: The Leasehold and Freehold Reform Act 2024 has been passed but is not yet fully in effect. The government has indicated that it will be implemented in stages over the next few years, likely between 2025 and 2026.
• New Legislation: The Leasehold and Commonhold Reform Bill, which aims to abolish marriage value, is still in the draft stage. It’s expected that this bill won’t be introduced into Parliament until late 2025 at the earliest, and it may take even longer for it to be enacted and come into force. Realistically, you might not see these changes until 2026 or later.

2. Marriage Value Abolition:

• Potential Benefits: If the reforms go ahead as planned, the abolition of marriage value could make it cheaper for you to extend your lease, especially if it’s currently below 80 years.
• Risks of Waiting: However, waiting for the reforms means that your lease term will continue to decrease, potentially increasing the premium you’ll need to pay if the reforms are delayed or not as favorable as anticipated.

3. Impact of Current Lease Length:

• Lease Below 80 Years: If your lease is close to or below 80 years, waiting could result in further decreases in the lease term, increasing the urgency of extending it before it gets even shorter. However, waiting might still be beneficial if you’re willing to gamble on the timing and outcome of the reforms.
• Lease Between 80 and 82 Years: If your lease is in this range, it’s a tricky decision. You could extend now to avoid crossing the 80-year threshold or wait for the potential abolition of marriage value, knowing that the reforms may take several years.

4. Factors to Consider:

• Personal Circumstances: If you plan to stay in your property long-term and can afford to wait, it might be worth holding out for the potential reforms.
• Market Conditions: If you plan to sell or remortgage soon, you may not want to wait, as a short lease can significantly impact your property’s value and marketability.
• Consultation and Secondary Legislation: Given the complexity of leasehold law, further consultations and secondary legislation will be needed before the new rules take effect, adding to the uncertainty and timelines.

5. Professional Advice:

• Get Expert Input: Given the complexity of these decisions and the uncertainty around when reforms will take effect, it’s advisable to consult with a leasehold specialist. They can provide tailored advice based on your specific situation and lease length.

If your lease is below 80 years, it might be worth waiting for the reforms, as the abolition of marriage value could significantly reduce the cost of extending your lease. However, this could take until 2026 or later, so if you’re in a hurry to sell or remortgage, or if your lease is approaching the 80-year mark, it might be safer to extend now. Ultimately, the decision will depend on your personal circumstances, your lease length, and how much risk you’re willing to take regarding the timing of the reforms.