Month: April 2025

The leasehold system in the UK has long been a topic of debate, with many homeowners facing issues related to excessive ground rents, costly lease extensions, and restrictive terms. As a result, the government has been working on leasehold reform to create a fairer system. But when is a leasehold reform bill expected to be introduced, and what changes will it bring?

1. Understanding Leasehold Reform

Leasehold reform refers to changes in property laws that aim to improve the rights of leaseholders and simplify the process of extending leases or purchasing freeholds. Over the years, there have been multiple discussions and legislative efforts to overhaul the system and provide leaseholders with more control over their properties.

2. Recent Leasehold Reforms

In recent years, the UK government has introduced various measures to address leasehold issues. The Leasehold Reform (Ground Rent) Act 2022 was a significant step, banning ground rents for new leases. However, existing leaseholders were still subject to ground rents and complex lease extension procedures.

3. When Is a Leasehold Reform Bill Expected?

The Leasehold and Freehold Reform Act 2024 received Royal Assent on May 24, 2024, officially becoming law. This Act introduces several changes aimed at making leasehold ownership fairer and more transparent.

One of the key provisions of the 2024 Act is the abolition of the “two-year rule,” which previously required leaseholders to own their property for two years before applying for a lease extension or freehold purchase. This rule change took effect on January 31, 2025, allowing leaseholders to take action immediately upon acquiring a leasehold property.

In addition to this, the government has announced further reforms that will be introduced in stages. Provisions related to the right to manage, which will allow leaseholders in buildings with up to 50% non-residential space to take control of their building’s management, are expected to be implemented in spring 2025.

 

4. Future Leasehold Reform Plans

While the 2024 Act addresses several pressing concerns, the government is planning additional reforms through the Draft Leasehold and Commonhold Reform Bill. This bill is expected to be introduced in the second half of 2025, following the publication of a White Paper in early 2025.

The upcoming bill may introduce further protections for leaseholders, including:

• Simplified processes for purchasing freeholds
• Strengthening rights for leaseholders to challenge unfair fees
• Promoting commonhold as an alternative to leasehold

These proposed changes aim to provide long-term solutions and create a more equitable property ownership system.

Also, learn more about Leasehold and Freehold Reform Bill

5. What This Means for Homeowners and Buyers

For current leaseholders, the 2024 Act already brings significant benefits, especially with the elimination of the two-year ownership requirement for lease extensions. Prospective buyers of leasehold properties can also benefit from greater transparency and fewer financial burdens.

However, those waiting for further reforms should stay informed about the Draft Leasehold and Commonhold Reform Bill. As the government prepares to introduce these changes, homeowners and property investors should assess their options carefully, whether extending their lease now or waiting for new legislation to take effect.

Conclusion

The long-anticipated leasehold reform is finally taking shape, with the Leasehold and Freehold Reform Act 2024 already in effect and further legislative changes expected in the second half of 2025. If you are wondering, “When is a leasehold reform bill expected?” The answer lies in these upcoming developments. Keeping an eye on government updates and consulting property experts will be crucial for leaseholders navigating these changes.

When extending the lease of a property, understanding how to calculate marriage value in leasehold is crucial. Marriage value represents the increase in a property’s value after extending a lease, shared between the leaseholder and the freeholder. This concept is particularly important for properties with short leases (below 80 years), as it significantly impacts the cost of lease extension.

In this guide, we’ll explore the marriage value calculation, key factors affecting it, and how to determine the cost of a lease extension.

1. What Is Marriage Value in Leasehold?

Marriage value refers to the increase in a property’s market value after extending its lease. This occurs because a longer lease enhances the property’s marketability, making it more attractive to buyers and mortgage lenders.

According to The Leasehold Reform, Housing and Urban Development Act 1993, when a lease falls below 80 years, the freeholder is entitled to 50% of the marriage value when the lease is extended. This makes lease extension costs higher for shorter leases.

2. Why Does Marriage Value Matter?

• Impacts Lease Extension Costs – The shorter the lease, the higher the marriage value, increasing the premium payable.
• Affects Property Marketability – Properties with longer leases have higher resale values and better mortgage options.
• Legal Requirement – If the lease is under 80 years, the leaseholder must share the marriage value with the freeholder.

3. How to Calculate Marriage Value in Leasehold?

The marriage value is calculated as the difference between the property’s value before and after the lease extension. It follows this formula:

Marriage Value Formula

Marriage Value=(Extended Lease Value−Short Lease Value)−(Freeholder’s Interest +Leaseholder’s Interest)Marriage\ Value = (Extended\ Lease\ Value – Short\ Lease\ Value) – (Freeholder’s\ Interest\ + Leaseholder’s\ Interest)Marriage Value=(Extended Lease Value−Short Lease Value)−(Freeholder’s Interest +Leaseholder’s Interest)

Since the law requires that marriage value is split 50/50 between the leaseholder and freeholder, the leaseholder pays half of the calculated marriage value as part of the lease extension premium.

Step-by-Step Calculation

1. Determine the property’s current market value with the short lease.
2. Estimate the property’s value after lease extension (typically adding 90 years to the remaining lease).
3. Calculate the freeholder’s interest (future ground rent + reversionary interest).
4. Subtract the freeholder’s interest from the increased property value.
5. Divide the resulting marriage value by 2, as the leaseholder must pay 50% of this amount to the freeholder.

 

4. Example Calculation of Marriage Value

Let’s say:

• Current property value with short lease: £200,000
• Estimated property value after lease extension: £250,000
• Freeholder’s interest (ground rent & reversionary interest): £30,000

Using the formula:

Marriage Value=(£250,000−£200,000)−£30,000Marriage\ Value = (£250,000 – £200,000) – £30,000Marriage Value=(£250,000−£200,000)−£30,000 =£50,000−£30,000=£20,000= £50,000 – £30,000 = £20,000=£50,000−£30,000=£20,000

Since the leaseholder pays 50% of the marriage value:

Leaseholder’sPayment=£20,000÷2=£10,000Leaseholder’s Payment = £20,000 \div 2 = £10,000Leaseholder’sPayment=£20,000÷2=£10,000

This £10,000 is added to other costs (e.g., ground rent compensation, legal fees) to determine the total lease extension premium.

Also, learn more about How to Calculate a Lease Extension Valuation

5. Factors Affecting Marriage Value Calculation

Several factors influence how to calculate marriage value in leasehold, including:

• Remaining Lease Length – The shorter the lease, the higher the marriage value.
• Property Market Value – Higher-valued properties generate greater marriage value.
• Ground Rent Terms – Future ground rent obligations impact the freeholder’s interest.
• Location & Market Trends – Local property demand affects valuation.

6. How to Reduce Marriage Value Costs?

• Extend the Lease Before It Falls Below 80 Years – No marriage value applies for leases above 80 years, significantly reducing costs.
• Negotiate with the Freeholder – Some freeholders may accept a lower premium if negotiated properly.
• Use a Professional Lease Extension Valuation – A surveyor or lease extension specialist can help determine the best possible terms.

7. Legal Aspects of Marriage Value in Lease Extensions

• Under The Leasehold Reform Act 1993, leaseholders have a legal right to a 90-year extension at a fair valuation.
• If disputes arise, leaseholders can take the case to the First-tier Tribunal (Property Chamber) for a valuation resolution.
• Engaging a chartered surveyor and solicitor ensures fair pricing and compliance with legal procedures.

Conclusion

Understanding how to calculate marriage value in leasehold is essential for leaseholders planning an extension. Since marriage value significantly increases costs once a lease falls below 80 years, acting early can save thousands. By knowing the calculation method, factors influencing valuation, and legal implications, leaseholders can make informed decisions and negotiate better lease extension terms.