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“Tinkering” with leasehold reforms

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Proposals by the Law Commission for the reform of the law on leaseholds do not go far enough and have been slammed as mere “tinkering”, say press groups for leaseholders.

That was the message in a story by the Guardian newspaper on the 9th of January, which described how the Law Commission suggested making the extension or purchase of a lease on property cheaper. The proposals attempted to strike a balance between the interests of leaseholders and existing freeholders.

Although the Commission’s proposals have disappointed leaseholder groups, they do include the proposed abolition of one of the main bones of contention between leaseholders and freeholders – the so-called marriage value of extending a lease.

The concept of marriage value was described in an article published by the BBC last week.

Marriage value is built into the calculation of the payment made to the freeholder when the leaseholder wants to extend the lease. It comes into effect when a lease with less than 80 years to run is extended. The calculation of the payment to the freeholder comprises three elements:

    • a premium for the additional years’ added to the length of the lease;
    • payment of a lump sum to clear the outstanding ground rent due; and
    • a further premium called the marriage value in extending the lease.

Marriage value may account for up to a third of the cost of extending a lease – and  its removal is one of the options suggested by the Law Commission.