Do you need to extend your lease to save your marriage (fee)?
By Daniel Russell
If you’re living in a leasehold property then Government proposals to change the law as they relate to residential leases will have a definite – and hopefully positive – impact on how your lease is valued and the control you have over your home.
Typically, the leases offered for residential homes run for a long period – usually something between 90 and 120 years so as to comfortably see you through a lifetime in the property. However, extensions that maintain that period still further add to the value of both the lease and the house, which is usually in everyone’s interests.
So, the dilemma facing people whose lease has already run for a good number of years is whether to look to extend the term now or wait to see if the Government implements its planned reforms, which would likely reduce the costs associated with leasehold properties.
But there is a more urgent issue facing people whose lease is ticking down toward 80 years and who will need to act quickly if they want to avoid paying a potentially hefty sum to their landlord.
Under current law – the 1993 Leasehold Reform Act – there is an additional fee payable to the landlord when extending a lease that has fewer than 80 years to run.
When a lease is extended, a calculation is made to determine what value a longer lease will add to the property – known as the marriage value. The difference between the old value and the new value is then shared between you and the freeholder (your landlord) and the leaseholder must then pay the freeholder their share. The advice organisation Lease has a more detailed explanation of Marriage Value, which you can read here.
It doesn’t take a degree in mathematics to work out the implications of that if you’re sitting on an eroding lease for a London property – particularly if you’ve had the lease for twenty or thirty years, during which time residential property values in the capital (and beyond) have skyrocketed.
However, if the lease is extended before it hits 80 years, there is no Marriage Fee to be paid.
There’s little doubt, then, that negotiating a lease extension in these circumstances is almost certainly in your financial interest.
But lease negotiations aren’t always straightforward and can take a long time to conclude as surveyors for both parties negotiate over things like the value impact of the property’s location, ground rent, the value of the property with the current lease versus the value with a longer lease and a dozen other complex considerations.
And of course, the faster the clock ticks, the more leverage the freeholder has in those discussions.
Whilst any new legislation may abolish the Marriage Fee, the results of the Government’s consultation on its plans haven’t yet been published and will still need to go through a Parliamentary process to be enshrined in law.
All of this will take time, and if your lease is already running to the wire, you may be wise to seek an extension now rather than gamble on a new law coming into effect in time to save you from paying out on the Marriage Fee.
Our advice would always be to get specialist advice from a solicitor. You’ll need legal support when the time comes to negotiate your lease anyway, so working with a sound strategy based on your lawyer’s advice makes all kinds of sense.
If you need to renegotiate your lease, our specialist property solicitors can help you. Call us on 020 8445 3331 to find out how we can work with you to get the right outcome that’s in your best interests.