In a leasehold enfranchisement, the imposition of marriage value takes half of any accretion of value realised between tenants’ notice and completion. But does the law provide for marriage value? asks Edith Crowther
Many people object to government proposals to limit the imposition of marriage value on residential lease enfranchisements to cases where the lease or leases have fallen below 80 years.
But marriage value on any length of term does not really tally with English land law – and it seems even more unlikely that it would tally with European or American land law. Any sale of land, once contracted for, creates a constructive trust between vendor and purchaser during the period between contract and completion. In addition, an agreement for a lease creates a lease in equity from the date of the agreement, which means that the agreement is enforceable by specific performance.
“Equity finds a constructive trust in those circumstances, on the principle of unjust enrichment.” (Maudsley and Burn, Land Law: Cases And Materials, Butterworths 1992). The same law and equity apply under statutory enfranchisements. The date when contractual obligations begin is the date of the tenant’s notice, provided the notice has been registered for statutory lease extension under the 1993 Act and for enfranchisement of houses under the 1967 Act, and possibly also for collective enfranchisement under the 1993 Act. There is no need to go to court to decide whether there is a constructive trust or not. There just is.
Vendor’s obligations
As a result, certain obligations rest on the vendor/trustee – not all the obligations that an officially appointed trustee might have, but certain basic ones. One of these is that the beneficial interest of the vendor/trustee/freeholder must go entirely to the purchaser/beneficiary/leaseholder/s. The trustee is allowed to take out of it only his legitimate costs – hence the provisions in the 1967 and 1993 Leasehold Reform Acts that the purchasing tenant/s pay the vending landlord’s valuation, verification of title and issue of lease costs. The rest of the accretion in value between the issue of the tenant’s notice and completion should in equity and trust law go entirely to the tenant.
From beneficiary to trustee
The imposition of marriage value, however, shovels at least 50% of that accretion away from the beneficiary and over to the trustee. Maybe this is why I cannot find the term “marriage value” in any dictionary of legal terms. It is possible, when drafting the written bargain in the open market, to insert a condition that some or all of the beneficial interest should pass to the vendor – for example, on the death of the purchaser.
But this is not an appropriate thing to do where the purchaser has a form of ownership as strong as long leasehold, with its repairing obligations and its position in both English and ECHR law that the bricks and mortar belong to the long leaseholder who pays for them and their upkeep, and only the ground belongs to the ground landlord or freeholder.
Indeed, neither of the reform statutes has openly and explicitly stated that there is a marriage value, except in the case of lease extension under the 1993 Act, arguably the least likely place to find an explicit and unavoidable imposition of marriage value.
There are, after all, only two forms of property ownership in English law: freehold and long leasehold. I do not know why long leasehold is continually relegated to some lower category of title. There is not even any inherent right of re-entry by the freeholder: that right has to be written into each individual lease, or it would not exist.
