The lease extension premium is the sum of money you pay to your freeholder in order to extend your lease under the statutory process. The calculation is governed by the Leasehold Reform, Housing and Urban Development Act 1993, but in practice it is a complex valuation exercise based on property value, lease length, ground rent, and case law.
Because premiums can vary widely, it’s important to understand the factors that go into the calculation — and why professional valuation advice is essential.
📊 Key factors in calculating the premium
- Current property value
The starting point is the open market value of your flat (or house) with its existing lease. Higher-value properties will usually face higher premiums. - Unexpired lease length
- If your lease has over 80 years left, the premium is usually lower.
- Once it drops below 80 years, “marriage value” becomes payable, and the premium increases sharply.
- Ground rent
The level of ground rent payable under your lease also affects the calculation. Leases with higher or escalating ground rents generally result in higher premiums, because the freeholder is giving up that future income when the lease is extended. - Marriage value
If your lease has fewer than 80 years unexpired, the law requires that you share the increase in property value created by the extension with the freeholder. This is called marriage value, and it can significantly increase the premium payable. - Deferment and capitalisation rates
Specialist valuation assumptions — based on established case law such as Sportelli — are applied to discount the value of the freeholder’s interest. Small changes in these rates can have a big impact on the calculation.
⚖️ Why professional valuation matters
Although the framework is set in law, there is still scope for interpretation and negotiation. Freeholders often seek to maximise the premium, while leaseholders want to minimise it. That’s why:
- Our qualified surveyors use recognised valuation models, comparable evidence, and Tribunal precedents to calculate a fair and reasonable premium.
- We provide tailored strategic advice to position your claim effectively.
- We handle negotiations on your behalf to ensure you do not overpay.
If agreement cannot be reached, the First-tier Tribunal (Property Chamber) can determine the premium.
🧮 Use our Leasehold Calculator
For a quick guide to what your lease extension might cost, you can try our Leasehold Calculator on the homepage of extension.lease. By entering a few simple details — such as your property’s value, current lease length, and ground rent — you’ll receive an instant estimate of the likely premium.
This provides a helpful starting point, but for an accurate figure tailored to your property, our team can provide a full professional valuation and manage the process from start to finish.
✅ Conclusion
The lease extension premium is influenced by several interlinked factors: your property’s value, your ground rent, your lease length, and (if relevant) marriage value. Because the calculation is technical and often contested, having expert advice is crucial.
At extension.lease, we combine in-depth valuation expertise with strong negotiation skills to secure the best possible outcome for our clients. Start by using our Leasehold Calculator today to get an idea of your likely premium, then speak to our team for a detailed breakdown and strategic advice.
