The Government proposal to reform the shared ownership model is set to include all new leases being granted for 990 years, instead of the current 99 or 125 years.
How will the shared ownership reform affect existing owners?
Existing shared owners will be given the right to extend their lease to 990 years where their Registered Provider landlord is also the freehold owner of the property.
Further details on the exact details are yet to be announced, so it is unclear whether;
- The shared owner would need to pay a premium for the extension.
- Any premium is capped.
- Any associated fees would also be capped.
What is the marriage value in leasehold property?
Most lenders will not lend on a lease that has less than 85 years left to run. Where there are less than 80 years left to run something called ‘marriage value’ is included in the calculation of the premium, which can increase the sum significantly.
The Governments proposal to reform the shared ownership model also includes the abolishment of ‘marriage value’. So if a shared owner still has a few years left before the lease term dips below 80 years, they may delay their application to extend in order to see which of the above scenarios applies, which could potentially save them money.
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