As the Leasehold and Freehold Reform Act is now law (to be ratified in the next sitting of Parliament), we ask what the impact will be on Marriage Values.
A ‘marriage value’ is defined as the difference in the freehold and leasehold values of a property, calculated at the point at which the leaseholder takes on the freehold.
The most significant impact on Marriage Value of the Act, is that if you hold a lease which is below 80 years, and your ground rent is over 0.1% of the value of your property, it should be cheaper. This is precisely the aim of the Act – to help residents with short leases, by abolishing Marriage Value for these properties.
However, there is a wrinkle if your lease is over 80 years, as it could make your lease extension more expensive. This is because there is still no detail around the rates that are to be used in ‘deferment and capitalisation rates’. The aim is to set them at a later date and many experts believe that if they’re set at lower rates than valuers are currently setting them at, this could impact the cost of lease extensions. This applies as well if your ground rent is low.
The fact is, we will not know any of this for certain until implementation, which is unlikely to be before 2025 or 2026. We would advise not delaying, if you’re currently dealing with an absent freeholder, as reform is still some way off at time of writing. Tracing an absentee freeholder is not always the most expensive piece of the puzzle, and we would always advise starting a search sooner rather than later.
