Marriage Value vs. Marriage Tax: Debunking Confusion in Lease Extension Talks

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    Lease extensions can be intricate affairs, especially when it comes to the concepts of “Marriage Value” and “Marriage Tax.” These terms often lead to confusion and misconceptions among leasehold property owners. In this comprehensive blog, we will delve into the differences between Marriage Value and Marriage Tax, debunk common myths, and equip you with the knowledge to navigate lease extension talks confidently.

    Understanding Marriage Value:

    Marriage Value, as we discussed in a previous blog, refers to the increase in a property’s value that arises when its lease is extended. It represents the additional value created by combining the leasehold interest (short lease) with the freehold interest (extended lease).

    Understanding Marriage Tax:

    Marriage Tax is not a technical term related to lease extensions. Instead, it is a colloquial term used to describe the premium or additional cost that arises when the lease term drops below 80 years. The cost increases significantly once the lease falls below this threshold due to the introduction of Marriage Value calculations.

    Debunking the Confusion:

    1. Myth: Marriage Tax and Marriage Value are the same.
      Reality: Marriage Tax is not a formal term in lease extension processes. It is used informally to describe the impact of Marriage Value when the lease term is less than 80 years.
    2. Myth: Marriage Value only applies to certain properties.
      Reality: Marriage Value is a standard consideration in lease extension negotiations for leasehold properties with less than 80 years remaining on their lease.
    3. Myth: Marriage Value is a penalty imposed by freeholders.
      Reality: Marriage Value is a legitimate factor in lease extension negotiations based on the property’s increased value after the extension.
    4.  Myth: Marriage Value calculations are fixed and non-negotiable.
      Reality: While Marriage Value calculations are based on formulas, there is room for negotiation during the lease extension process.
    5. Myth: The only way to reduce Marriage Value is to extend the lease early.
      Reality: While extending the lease earlier can reduce the impact of Marriage Value, there are other strategies to explore during negotiations.

    Navigating Lease Extension Talks:

    During lease extension talks, it is essential to have a clear understanding of Marriage values and their implications. Here are some key points to consider:

    1. Seek Professional Advice:
      Engage the expertise of a qualified surveyor or valuer experienced in lease extensions and
      Marriage Value calculations. They will provide accurate valuations and guide you through the negotiation process.
    2.  Start Early:
      Consider extending your lease before it drops below 80 years to minimize the impact of Marriage Value and the potential “Marriage Tax” effect.
    3. Negotiate Wisely:
      Collaborate with the freeholder to reach a fair agreement on the lease extension premium, considering both the lease term and ground rent.
    4. Explore Alternative Options:
      In some cases, it may be beneficial to negotiate separate terms for the lease extension premium and ground rent, finding a balance that suits both parties.


    Also Read

     The Dos and Don’ts of Negotiating Marriage Value in Lease Extensions

     Calculating Marriage Value: Understanding the Numbers Behind Lease Extensions


    Understanding the differences between Marriage Value and Marriage Tax is crucial to navigating lease extension talks successfully. By debunking common myths and seeking professional advice, you can approach negotiations with confidence and secure a lease extension that aligns with your financial goals. Remember that each lease extension case is unique, and seeking tailored advice from experts will help you achieve the best possible outcome in your leasehold property investment.

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