How much will you have to pay to extend your lease? The answer depends on a statutory formula that combines several factors — here's exactly how a RICS lease extension valuer calculates your premium.
Under the statutory route, the premium is made up of three components:
This represents the present value of the ground rent income the freeholder will lose over the remaining lease term. It is calculated by capitalising the annual ground rent at an agreed rate over the remaining lease years.
Example: £200/year ground rent with 75 years remaining, capitalised at 6% = approximately £3,200
This represents the present value of the freeholder's right to regain the property at the end of the current lease term. It is calculated by discounting the current "freehold vacant possession value" at the deferment rate over the remaining lease years.
Example: Property value £400,000, 75 years remaining, deferment rate 5% = approximately £18,000
Marriage value is the increase in the property's combined value (freehold + leasehold) that results from the extension being granted. The freeholder is entitled to 50% of the marriage value. This component dramatically increases the premium when the lease is short.
Example: If extension increases combined value by £40,000, freeholder gets £20,000 in marriage value
| Lease Remaining | Marriage Value? | Illustrative Premium (£300k flat) | Urgency |
|---|---|---|---|
| 90+ years | ❌ No | £3,000–£8,000 | Low |
| 85–89 years | ❌ No | £5,000–£15,000 | Medium — act soon |
| 80–84 years | ⚠️ Approaching | £10,000–£25,000 | Act now |
| 70–79 years | ✅ Yes (50%) | £20,000–£40,000 | Urgent |
| Below 70 years | ✅ Yes (50%) | £35,000–£100,000+ | Critical — and mortgage risk |
The shorter the remaining lease, the higher the premium. The relationship is non-linear — costs accelerate sharply below 80 years.
Higher-value properties = higher premiums. The reversion value and marriage value are both calculated relative to the property's current market value.
Higher ground rents increase the ground rent capitalisation component. Onerous ground rents (e.g., doubling ground rents) significantly affect premium calculations and property value.
Typically 5–6% (set by Tribunal guidance). A lower deferment rate = higher premium. This is often the most hotly contested variable between valuers.
Location affects both the property value (and thus the reversion/marriage value calculations) and the deferment rate used. Prime London locations have different precedents to regional markets.
A specialist lease extension valuer will:
Tip: Always use a valuer who specialises in lease extension work — not a general estate agent or surveyor. Members of the Association of Leasehold Enfranchisement Practitioners (ALEP) are a good starting point. Their expertise directly affects the premium you pay.