How is the cost of extending my leasehold calculated?

Full answer

The cost of a statutory lease extension (90 years added on a flat, plus ground rent reduced to a peppercorn) is a premium paid to the freeholder, calculated by a valuation rather than a published rate. The premium has up to three components. First, the freeholder loses future ground rent income, so the present value of that lost rent is capitalised. Second, the reversion: the freeholder eventually gets the property back at lease end, and the value of that delayed right is discounted to today. Third, and most important, marriage value -- the uplift in the property's value once the lease is extended. By law, marriage value is split 50/50 between you and the freeholder, but it only applies where the unexpired term is below 80 years. This is why leases are far cheaper to extend before they drop under 80 years. Who it affects: leaseholders of flats (and some houses) in England and Wales. The calculation uses capitalisation and deferment rates set by valuation evidence and case law, not a government rate card, so two flats can produce very different premiums. Worked illustration of the principle: a flat with 82 years left avoids marriage value entirely and might cost only a few thousand pounds in ground rent and reversion value; let it fall to 78 years and marriage value is added, often adding thousands more. The exact figures depend on property value, ground rent and the rates applied. 2026/27 note: leasehold reform legislation continues to phase in changes intended to remove marriage value and standardise rates, but you must confirm the current rules and dates on gov.uk before relying on them. Always instruct a RICS surveyor for a formal valuation -- online estimates are only a starting guide.

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