What is marriage value?

by The Chartered Surveyor

Question

I’ve received a lease extension valuation from a surveyor that says because my lease has less than 80 years left to run I have to pay the freeholder 50% of marriage value. The report explains what marriage value is, but the language is very technical and I’m not sure I fully understand. Could you explain in simple terms what marriage value is?

Answer

The piece of legislation that gives you the right to claim a new lease is the Leasehold Reform, Housing and Urban Development Act 1993 (as amended). Under the Act, where the lease of the subject property has an unexpired term of less than 80 years the freeholder is entitled, as part of the premium, to receive 50% of marriage value.

Marriage value is the value created by combining two assets, where the value of those assets is greater in combination than in separation. In the context of your lease extension valuation, the equation will, in simple terms, look something like this.

Value of freeholder’s interest after lease extension + value of leaseholder’s interest after lease extension = Value of proposed interests.

Value of freeholder’s interest before lease extension + value of leaseholder’s interest before lease extension = Value of current interests.

Value of proposed interests – Value of proposed interests = Marriage value.

Under the legislation the valuation is subject to a number of special statutory assumptions. For example, in assessing the freehold value of the property, the effect of improvements carried out by the lessee or his predecessors in title must be disregarded. In assessing the value of the lessee’s current lease, the lessee’s right to extend his lease or collectively purchase the freehold must be disregarded.

It is a complicated area of law and valuation, so it’s important to take advice from a specialist valuer.