If you own a leasehold property, you may come across the term marriage value, especially when extending your lease or buying the freehold. This can have a significant financial impact, so it’s important to understand what it means and how it’s calculated. In this guide, we’ll explain marriage value and how it affects leasehold properties in the UK.
What does leasehold mean?
Leasehold ownership means you own the property for a fixed period but not the land it stands on. Instead, you lease it from a freeholder (or landlord) for a set number of years - typically between 99 and 999 years. As the lease gets shorter, especially below 80 years, it can reduce the property’s market value and make lease extensions more expensive.
👉 Want to learn more? Check out our guide on how leasehold properties work.
What is leasehold marriage value?
Marriage value is the increase in a property’s market value when a leaseholder extends their lease or buys the freehold. The term 'marriage' refers to the way the existing leaseholder’s interest combines with the benefits of a longer lease or full ownership, boosting the property’s worth. For example, if extending a lease raises the property’s value from £200,000 to £220,000, the marriage value is the £20,000 increase.
In the UK, marriage value is payable when extending a lease if the term is below 80 years. This means leaseholders with shorter leases will need to factor in this extra cost when planning a lease extension.
How is marriage value calculated?
Marriage value is usually calculated by comparing the value of a property before and after a lease extension. The amount should reflect the reduction of the property’s value, the freeholder’s share of the marriage value and any compensation owed. Under the Leasehold Reform Housing and Urban Development Act 1993, marriage value is normally split 50/50 between the leaseholder and the freeholder.
The process follows these steps:
Find the current market value of the property.
Estimate the market value of the property with an extended lease.
Calculate the increase in value, which represents the marriage value.
Split the marriage value between the leaseholder and freeholder.
What can impact the calculation?
The amount of marriage value you may need to pay when extending a lease depends on several key factors:
Remaining lease length: The shorter the lease, the higher the marriage value. Once a lease drops below 80 years, the cost of extending it increases significantly.
Ground rent: If your lease has high ground rent, the freeholder’s financial interest in the property is greater. This can increase both the cost of the lease extension and the marriage value.
Property market conditions: Marriage value is based on the difference between your property’s value with a short lease versus a longer lease. In a rising market, this gap can be bigger - leading to higher marriage value. In a falling market, the impact may be lower.
Negotiation between leaseholder and freeholder: While marriage value is usually split 50/50, there’s room to negotiate lease extension terms. If the leaseholder and freeholder disagree on the valuation, the case may need to be settled by the First-tier Tribunal (Property Chamber).
What is the 80-year rule for leasehold?
The 80-year rule is the current threshold in UK leasehold law. Once a lease falls below 80 years, you need to pay the marriage value when extending the lease. This leads to higher costs for leaseholders compared to extensions carried out before the lease term drops below this limit. The rule highlights the importance of acting early to avoid financial burdens.
What happens to marriage value when extending a lease?
If your lease has fewer than 80 years remaining, marriage value is added to the cost of extending it. This means you’ll need to pay half of the marriage value as part of the premium to the freeholder. However, if your lease is over 80 years, marriage value does not apply, making the extension significantly cheaper.
To negotiate a fair price, leaseholders usually get a professional valuation to determine how much they should pay. This valuation can help in discussions with the freeholder and is particularly useful if you choose to apply for a statutory lease extension - a legal process covered under the Leasehold Reform, Housing and Urban Development Act 1993.
💡 Tip: If your lease is nearing 80 years, it’s often best to extend it before it drops below this threshold to avoid paying marriage value. If you're unsure, speaking to an experienced lease extension solicitor can help you understand your options.
Is marriage value being abolished?
There have been ongoing discussions about reforming leasehold law in the UK, including plans to abolish marriage value. The UK government has been working to make leasehold ownership fairer and more transparent, aiming to reduce costs for leaseholders.
The Leasehold and Freehold Reform Act 2024 has now received Royal Assent (as of May, 2024), with the changes expected to take effect in 2025 or 2026. If marriage value is removed or reduced, it could make lease extensions cheaper and more accessible for leaseholders.
💡 What this means for you: If your lease is approaching 80 years, it’s worth considering an extension sooner rather than later. Marriage value currently applies once a lease falls below this threshold, making the process more expensive. Acting early could help you save on costs - especially before any legal changes come into effect.
FAQs
Do I have to pay marriage value?
Yes, if your lease has fewer than 80 years remaining, the marriage value lease is payable by law when extending the lease or purchasing the freehold. Acting before the lease drops below this threshold can avoid these extra costs.
Does a leasehold devalue a property?
Yes, as a lease’s remaining term decreases, the property’s market value declines. A short lease may make the property harder to sell and reduce its appeal to mortgage lenders.
Final thoughts
Marriage value is essential for leaseholders considering a lease extension or freehold purchase. Acting early, before the 80-year rule applies, can save significant costs. And when in doubt, professional advice from a property lawyer will help you to understand leasehold property.
References
Buying or owning a leasehold home by Gov.UK
First-tier Tribunal (Property Chamber) by Gov.UK
Disclaimer: This article only provides general information and does not constitute professional advice. For any specific questions, consult a qualified accountant or business advisor. Bear in mind that tax rules can change and will differ based on your circumstances.
