In short: A statutory lease extension premium is calculated under Schedule 13 of the Leasehold Reform, Housing and Urban Development Act 1993. It is the sum of the freeholder's lost ground rent, the freeholder's deferred reversion and, where the lease has 80 years or less unexpired, 50% of the marriage value. The unexpired term is the single biggest driver of the figure.
Last reviewed: 1 October 2026 by Patrick Oliver BSc (Hons) MRICS, RICS Registered Valuer.
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How is a lease extension premium calculated?
A lease extension premium is calculated using the statutory formula in Schedule 13 of the 1993 Act. The valuer adds together the diminution in the freeholder's interest (capitalised ground rent plus the deferred value of the reversion), 50% of any marriage value where 80 years or less remain, and any other compensation due to the freeholder.
If you own a flat on a long lease and have been quoted a premium, you have probably been told very little about where it comes from. It is not a percentage of value, a rule of thumb, or something your solicitor can estimate. It is a formula set out in law, and the inputs matter more than most leaseholders realise.
What is the legal basis for a statutory lease extension?
A statutory lease extension is a right under Section 42 of the Leasehold Reform, Housing and Urban Development Act 1993. A qualifying leaseholder of a flat can add 90 years to the existing term at a peppercorn (nil) ground rent, in exchange for a premium paid to the freeholder and calculated under Schedule 13 of the Act.
The premium is not negotiated from scratch. It is derived from a prescribed formula applied to the specific facts of the lease, although the inputs to that formula involve professional judgement.
What are the three components of a lease extension premium?
Schedule 13 requires the premium to be the aggregate of three components:
- Diminution in the landlord's interest: the freeholder's loss from giving up the ground rent and the right to regain the flat when the lease ends. This splits into the capitalised value of the remaining ground rent and the value of the reversion, deferred for the years left on the lease.
- Marriage value: where the unexpired term is 80 years or less, extending the lease increases the combined value of the freehold and leasehold interests. The leaseholder pays 50% of that uplift to the freeholder.
- Other compensation: any further identifiable loss to the freeholder caused by the extension. This is uncommon in a standard residential case.
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Why does the 80-year mark matter so much for a lease extension?
The 80-year mark matters because marriage value becomes payable once a lease has 80 years or less unexpired. Marriage value then rises sharply as the term shortens. Extending a lease before it crosses 80 years is one of the few decisions in the process that is genuinely within the leaseholder's control.
A lease with, say, 84 years remaining might attract a premium of a few thousand pounds. The same flat with 78 years remaining could see the premium jump substantially, purely because marriage value has entered the calculation.
What does a lease extension premium look like in practice?
As an illustration using round, indicative figures rather than a real case:
| Input | Illustrative figure |
|---|---|
| Freehold vacant possession value | £500,000 |
| Unexpired term | Just under 80 years |
| Relativity | c. 88% |
| Capitalisation rate | 7% |
| Deferment rate | 5% |
| Indicative premium | £15,000–£20,000 (mostly marriage value) |
Move the same lease to 90+ years unexpired and the premium could fall to a few hundred pounds, because no marriage value applies at all.
Which valuation inputs drive the premium most?
The unexpired lease term drives the premium more than any other input, followed by the freehold vacant possession value, the relativity applied, and the capitalisation and deferment rates. In rough order of impact:
- Unexpired lease term: by far the biggest factor, both directly and through the 80-year marriage value threshold.
- Freehold vacant possession value: usually the most contestable input, and where comparable evidence does the real work.
- Relativity: the percentage relationship between leasehold and freehold value at a given term. Different graphs (Savills, Gerald Eve, RICS) can produce materially different answers.
- Capitalisation and deferment rates: lower rates increase the premium. They are typically anchored to rates the First-tier Tribunal (Property Chamber) has accepted in comparable determinations.
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Has leasehold reform changed how lease extension premiums are calculated?
Not yet. The Leasehold and Freehold Reform Act 2024 will abolish marriage value, allow 990-year extensions and introduce prescribed valuation rates, but those provisions still await commencement regulations and no date has been set. A lease extension claimed today is valued under the existing 1993 Act rules, including marriage value below 80 years.
The two-year ownership requirement was removed on 31 January 2025, so a new owner can now serve a Section 42 notice straight away. We will update this page as soon as the valuation reforms are commenced.
Why does a professional lease extension valuation matter?
A professional valuation matters because relativity, rate selection and comparable evidence all involve judgement rather than a single correct answer. Two competent surveyors can reach different figures for the same lease. A RICS Registered Valuer working within Schedule 13, with reference to First-tier Tribunal precedent, gives a defensible, evidence-based figure for negotiation or the Tribunal.
If your lease is approaching the 80-year mark, it is worth getting a premium assessment well before you cross it. The cost of waiting can be considerable. See our lease extension valuation service or read Section 42 notices explained.
Lease extension premium: frequently asked questions
How much does it cost to extend a lease?
The cost of a statutory lease extension is the Schedule 13 premium plus professional fees, including the leaseholder's own valuer and solicitor and the freeholder's reasonable costs. The premium can range from a few hundred pounds on a long lease to tens of thousands where marriage value applies below 80 years.
What is marriage value in a lease extension?
Marriage value is the increase in the combined value of the freehold and leasehold interests that results from extending the lease. It applies only where the lease has 80 years or less unexpired, and the leaseholder pays 50% of it to the freeholder as part of the premium.
Should I wait for marriage value to be abolished before extending my lease?
Waiting is a gamble because no commencement date exists for marriage value abolition. Meanwhile the lease keeps shortening and, below 80 years, marriage value keeps growing. A leaseholder considering waiting should get a current premium valuation first, so the cost of delay is measured rather than guessed.
What is relativity in a lease extension valuation?
Relativity is the value of the existing lease expressed as a percentage of the freehold vacant possession value. It is usually read from a recognised relativity graph, and the choice of graph can materially change the premium, particularly on shorter leases.
Who pays the freeholder's costs on a lease extension?
Under section 60 of the 1993 Act the leaseholder pays the freeholder's reasonable costs of investigating the claim, the valuation and granting the new lease, in addition to the premium, but not the freeholder's Tribunal costs. The Leasehold and Freehold Reform Act 2024 will generally end this liability once commenced, but it still applies to claims made today.
How long does a statutory lease extension take?
A statutory lease extension typically takes several months. The freeholder has at least two months to serve a counter-notice after a Section 42 notice, and if terms remain in dispute either the leaseholder or the freeholder can apply to the First-tier Tribunal once two months have passed since the counter-notice, and no later than six months after it.
What happens if the freeholder does not serve a counter-notice?
If the freeholder fails to serve a counter-notice by the date given in the Section 42 notice, the leaseholder can apply to the County Court under section 49 of the 1993 Act. The court can determine the terms of the new lease in accordance with the proposals in the leaseholder's notice. The application must be made within six months of the counter-notice deadline.
What happens if the Tribunal deadline is missed?
If terms remain in dispute and no Tribunal application is made within six months of the counter-notice, the Section 42 notice is deemed withdrawn. The leaseholder remains liable for the freeholder's costs to that point and cannot serve a new notice for twelve months, by which time the lease is shorter and the premium may be higher.
Who qualifies for a statutory lease extension?
A leaseholder of a flat qualifies if the lease was originally granted for more than 21 years. Since 31 January 2025 there is no longer a requirement to have owned the flat for two years before claiming. Exceptions include business leases, flats let by a charitable housing trust as part of its charitable housing, and property within a cathedral precinct.
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