The 80-year cliff edge in your lease
Most flat owners have no idea there is a cliff edge in their lease, and they tend to find out once they are already past it. Your estate agent and mortgage broker probably won’t flag it, and your conveyancer may have mentioned it somewhere in the pile of documents you can’t remember reading. The cliff edge is marriage value, and it is written into the Leasehold Reform, Housing and Urban Development Act 1993.
In plain English, once your lease falls below 80 years the law requires you to give the freeholder half of any increase in value you get from extending. If extending adds £100,000 to your flat, the freeholder gets £50,000. The day before your lease reaches 80 years, marriage value is zero, and the day after you could be looking at tens of thousands of pounds extra.
There’s a cliff edge in your lease
- The 80-year lineMarriage value is written into the 1993 Act. Below 80 years your freeholder is entitled to half the value uplift. No letter, no warning.
- Same flat, different priceSame freeholder, same process, but the cost jumps by tens of thousands the day after you cross it.
- The reform gambleReform has been promised by several governments. At 82 or 83 years, waiting could take you straight over the edge.
- Know your numberYears left, ground rent and property value tell you whether to act now or breathe.
A South London example
A leaseholder called me earlier this year about a flat he bought in South London a few years ago. His estate agent told him it had 86 years left, and by the time he completed it had 85. Then he started a new job, life got busy and the lease slipped his mind. By the time he called us he had 79 years, so he had dropped below 80 and into marriage value. If he had called six months earlier, his premium would have been about £4,000. He is now looking at somewhere between £13,000 and £24,000.
What marriage value looks like in real money
Take the same flat, the same freeholder and the same process. At 81 years the premium might be around £5,000, and at 79 years it can be £20,000 to £30,000. That jump isn’t proportional to the two years in between, because it all lands at once when the lease crosses 80.
Two years apart, either side of the cliff
Below 80 years the negotiation changes as well. The premium is larger and can vary by thousands of pounds rather than a few hundred, so the negotiation gets more complex and the risk of ending up at tribunal goes up a lot.
Why some freeholders play games near 80 years
A client came to us last December with a little under 81 years left. We ran the formula and, by the book, her premium should have been between £6,600 and £6,900. Her landlord’s valuer came back asking for £8,200, and I wouldn’t budge. Some freeholders stall when a lease is this close to 80 because they know that if they frustrate you enough you might walk away, and if you walk away you legally have to wait a year before you can start again. In her case that year would have taken her below 80, and the freeholder would no longer be arguing over £1,500 but over £20,000 to £30,000 of marriage value. The closer you are to the line, the more the system rewards a freeholder for being difficult.
It affects selling and remortgaging too
Ten to fifteen years ago, most mainstream lenders would accept an 85-year lease. Today many of them start limiting their options below 90 years, and with all the bad news about leasehold in the press, buyers are more cautious as well. Even at 85 years, this can affect you now rather than at some point in the future.
Should you wait for leasehold reform?
A lot of leaseholders in marriage value are holding off, hoping the headlines mean the cost is about to come down. Leasehold reform has been debated in this country for over a century (you can find Winston Churchill’s father in the 1800s saying leasehold should be abolished). Parliament has instead made things 5 or 10% better for leaseholders every 20 or 30 years, eating the elephant one bite at a time.
The most recent Leasehold and Freehold Reform Act received royal assent, but most of what it contains hasn’t come into force and is sitting on a shelf. The Law Commission published its first paper on this round of reforms in 2016, ten years ago, and we are still waiting for 90% of its proposals. My expectation is that meaningful change, if it comes at all, is 2027 to 2028 at the earliest. A lease extension takes about a year, so you would be looking at 2028 to 2029 before you had a lease extended under new rules, and that may be the optimistic end.
Why reform moves so slowly
I once spoke to a freeholder I have a reasonable professional relationship with, who owns about £10 million of freehold property. He told me that if reform took him from £10 million to £5 million, it would be worth spending £1 million on lobbying. From £10 million to £8 million he might spend half a million, and from £10 million to £9 million he would probably accept it. With billions of pounds at stake, a lot of money is being spent to keep things as they are.
Reform won’t help everyone
Even if reform passes and marriage value goes, the other parts of the premium will probably have to rise to compensate freeholders and avoid a human rights claim. If you are below 80 years, reform will probably help you, but there are two groups it probably won’t:
- Leaseholders deep in marriage value, in the 1 to 30 year range, who may end up swapping the marriage value saving for a higher price on the 90 years they are adding.
- Leaseholders between 80 and 90 years, who would pay more for the 90 years without any marriage value to save.
Waiting is the right call for some people, but it is a gamble either way. You could wait, see nothing change and pay a higher premium on a shorter lease, or you could extend now and find out in a few years that you might have saved money. I normally ask people which of those two outcomes they would regret more.
How to know how urgent your situation is
Timing is a maths decision rather than an emotional one, and three numbers drive it: the years left on your lease, your ground rent and your property value. The premium comes from a formula set out in law, so you aren’t haggling as you would over a used car, you are negotiating the inputs to that formula. It has three parts: what you pay to remove the ground rent, what you pay to add 90 years, and what you pay to clear any marriage value. Above 80 years that third part is zero, and it is normally the expensive one.
This is how I judge urgency when someone calls in:
How urgent is your lease extension?
- 100+ yearsNot too worried.
- 90 to 100Breathing room. It won’t get cheaper.
- 85 to 90Start planning. You have time, but not unlimited.
- 80 to 85No time to waste.
- Under 80Marriage value damage is done. The premium keeps rising.
Rising ground rent
Ground rent matters separately from lease length. If yours doubles every 10 years, say from £400 a year to £800, the cost of buying it out rises with it. The maths makes this increase more gradual, but the faster your ground rent rises, the faster your premium will.
Why waiting is often the worst decision
Plenty of people tell me they will try to sell or remortgage first and come back if it doesn’t work, and every week we hear from someone years after they first spoke to us because it didn’t. A lease extension takes about 6 to 9 months and can take years, and during that time you can’t sell or remortgage. If a sale runs for a year and falls through before you start the extension, you could be looking at a two to three year diversion before you can sell.
We don’t have to sell anyone on a lease extension, because it comes down to the maths and you either need one or you don’t. If you want to know where you stand, request your free lease report. It takes about two minutes, uses data from HM Land Registry and other sources, and shows where your lease sits against these numbers.
