Why is the Length of Your Lease Significant?
If the length of the lease is shorter than 80 years, your property steadily becomes less valuable. If you are looking to sell your leasehold property, it will be much more difficult for a buyer to get a mortgage or even for you to re-mortgage with a lease of this length. It basically becomes more and more unsaleable.
The other thing to bear in mind is that when your lease has 80 years or less left, the freeholder starts “acquiring” a value in the property, which is called the ‘marriage value’. This is the freeholder’s share of the increase in the property’s value that the lease renewal has generated. This share will always be 50%.
Steve Williams, Leasehold specialist at Banner Jones says ‘The calculation of the marriage value can be complex as there are various factors to take into account, but in a nutshell, the marriage value is 50% of the increase in property value once lease is renewed. If the property value went up by £10,000 – you’d pay a premium of £5000 to the freeholder, on top of the lease renewal cost.”