How a lease extension premium is worked out
The premium is the price you pay the freeholder for the extra years. It is calculated from three main ingredients: the value of the flat, the ground rent payable, and how many years remain on the lease. The fewer years left, the more the freeholder loses by granting an extension, so the premium climbs steeply as the lease shortens.
On top of the premium you pay professional fees. Under the current statutory route you usually cover both your own and the freeholder's reasonable valuation and legal costs, which is why extending a lease is rarely a small bill.
Roughly what to expect (illustrative only)
These are broad illustrations. Premiums vary enormously by location and flat value, so always get a specialist valuation.
| Years remaining | Marriage value? | Relative cost |
|---|---|---|
| 90+ years | No | Lowest, often a few thousand pounds plus fees |
| 80 to 89 years | No | Moderate, rising as 80 years approaches |
| Just under 80 years | Yes | Jumps sharply once marriage value applies |
| 60 to 70 years | Yes | High, often tens of thousands |
| Under 60 years | Yes | Very high, and hard to mortgage |
Reform proposals aim to remove marriage value, but until changes are fully in force, the 80-year threshold still bites.
What drives the cost
- Years remaining on the lease, the shorter, the more expensive.
- Whether the lease is above or below 80 years (marriage value).
- The value of the flat and the ground rent payable.
- Professional fees, you usually pay both sides' valuer and solicitor.
- Whether you use the statutory route or negotiate informally with the freeholder.
Statutory route vs informal agreement
| Statutory route | Informal (voluntary) deal | |
|---|---|---|
| Extra years | 90 years on top of existing (currently) | Negotiable, whatever is agreed |
| Ground rent | Reduced to a peppercorn (nil) | May remain or even increase |
| Price control | Set by formula, can go to tribunal | Whatever freeholder will accept |
| Certainty | Higher, legally backed | Lower, depends on goodwill |
Informal deals can be quicker but may leave you with ongoing ground rent or worse terms. Take legal advice before agreeing.
Beware the 80-year threshold
Below 80 years, marriage value makes extending far more expensive and lenders may refuse a mortgage. If buying a flat near 80 years, factor the extension into your offer or ask the seller to start the process before completion.
Leasehold reform and what it means for you
The Leasehold and Freehold Reform Act sets out major changes: a standard extension term of 990 years, the removal of marriage value, and an end to the two-year ownership wait before you can extend. These reforms are being introduced in stages, with detailed rules following secondary legislation.
Until the changes are fully in force, the existing rules still apply, so do not assume a cheaper deal is automatically available yet. If you are buying a short-lease flat, get current advice and a specialist valuation so you price the extension correctly into your offer.