Most long residential Leases are granted for an initial term of 999, 125 or 99 years. It is important to realise however that as the remaining term of the Lease decreases the potential value of the Lease reduces with it. For this reason a Lease is often described as a “Wasting” asset.
This is important as at certain times during the Lease it may be necessary to seek to extend the remaining term of the Lease. Most Lenders, forexample, insist upon a certain number of years remaining on the Lease before they will agree to lend against it. This typically would be between 50 and 70 years.
A Lease can be extended either by agreement with the Landlord or, if the Tenant qualifies, pursuant to a procedure set out in the Leasehold Housing and Urban Development Act 1993. In either case the Landlord will usually receive a payment in consideration for the Lease extension.
Another critical time from a Tenant’s viewpoint during the life of a Lease is when 80 years remain on the Lease. If the Tenant seeks to extend a Lease term with fewer than 80 years to run then a Landlord, as part of his payment, can claim an additional sum known as “Marriage Value”.
The Landlord cannot claim Marriage Value where there is longer than 80 years left to run at the time that the Lease is extended.
If you are a Tenant with say, 82 or 83 years left to run on your Lease why not contact us to discuss this matter further. It may well be worth seeking to extend your Lease sooner rather than later so as to avoid the impact of the Marriage Value. Our experienced team can assist you in this regard.