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The legislation states that if a lease is held by a participating member of collective enfranchisement where the unexpired term exceeds 80 years at the valuation date, then no marriage value is payable. However if unexpired term is less than 80 years unexpired then taking the  improved value of the property which is £1,650,000, the leaseholders present interest of £1,500,000 is subtracted and from that figure, the freeholders interest of £15,027 is subtracted leaving a marriage value of  £134,973. The 50/50 split between the freeholder and the enfranchising leaseholders, means the leaseholders have to pay half, which is £67,486 in addition to the freeholder’s interest.

Assuming there are no extra costs arising from additional freeholders’ interests or injurious affections, (this relates to a compulsory purchase situation where only part of something is taken) the potential valuation of the building would be the following:

  1. Freeholders interest of £15,027
  2. Marriage Value x 50% of £67,486
  3. Possible purchase price of £82,513 or £8,250 per flat

This example shows that the marriage value can considerably exceed the value of the freeholder’s interest. Its calculation is dependent upon the estimated increase in value of the flats and so the lower the increase the lower the marriage value. This is an area where the input of a valuer with local knowledge is of paramount importance to both parties in order to provide substantive comparable evidence of the local market and how, if at all, flat values will be affected.
The longer the current lease the lower the latent marriage value may be, until eventually it becomes negligible.

So, in essence marriage value is the following:

  1. The value of the flats with a long lease;
  2. Minus their present unimproved value in a ‘no Act world’;
  3. Minus the capitalisation of the ground rent and the reversionary value;
  4. All added together and divided by 2.

It may be however that the leaseholders immediate landlord will not be the competent landlord but will be an intermediate landlord. How this affects the process can be read here.

 

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