Lease extension valuation
Why a professional valuation matters
Valuing a lease extension is complex. Even small changes in assumptions, such as ground rent or interest rates, can change the price by thousands of pounds.
We recommend you instruct a qualified valuer (chartered surveyor) who specialises in lease extension work. They will:
- estimate a best- and worst-case range for your premium
- advise on what to offer in your Section 42 notice
- respond to the landlord’s counter-valuation
- negotiate with the landlord’s valuer
- act as expert witness at a tribunal if needed
Without expert advice, you risk offering too much or too little, which can lead to overpaying, disputes, invalid notices, or delays.
Find a chartered surveyor at the RICS website.
Valuation assumptions
Valuation under the Leasehold Reform, Housing and Urban Development Act 1993 follows specific assumptions. In brief, your valuer must:
- treat the sale as open-market between a willing buyer and seller at the valuation date
- disregard your improvements (any works you or a previous leaseholder have done that add value)
- assume the new lease is at a peppercorn rent
- value the landlord’s current interest as the term (ground rent income for the rest of the existing lease) plus the reversion (the right to vacant possession at the end of the lease), adjusted for the extra 90 years
These assumptions can significantly change the premium compared with ordinary market valuations.
The use of rates
Two technical rates are used in the valuation:
- capitalisation rate – the rate of return an investor would expect for receiving your ground rent (used for the “term”)
- deferment rate – the rate used to discount the future vacant-possession value to today’s value (used for the “reversion”)
Small changes in either rate can move the premium by thousands of pounds. Valuers use case law, RICS guidance, and local evidence to support their rates.
Relativity: short lease versus long lease
Relativity shows how much a short lease is worth compared with a long lease or freehold value.
- It’s expressed as a percentage (for example a 70-year lease might be 90% of the long-lease value).
- Valuers use relativity graphs and local sales evidence to determine this.
- Below 80 years, relativity usually falls more steeply, increasing the marriage value.
Your valuer should explain which relativity sources they used and why.
How ground rent patterns affect price
Ground rent terms influence the “term” value. Tell your valuer if your ground rent is:
- fixed (for example £150 per year)
- RPI-linked (rises with inflation)
- stepped or doubling (for example doubles every 10, 20 or 25 years)
Rents that rise over time usually increase the premium because the landlord loses more future income.
How professional valuers calculate the premium
Professional valuers also use data models such as hedonic regression and relativity graphs to help calculate how lease length affects flat value. These methods analyse real market data to estimate what proportion of a property’s full freehold value should be attributed to a given lease length.
Different graphs or models may lead to slightly different results. This means 2 valuers can reach different conclusions while both using accepted professional methods.
The courts have said that local market evidence often carries more weight than theoretical graphs. Professional bodies like the Royal Institution of Chartered Surveyors (RICS) also note in their professional standards that evidence from market transactions are the best and most reliable source of evidence, though assessing the data can be difficult.
Marriage value and the 80-year rule
If your lease has 80 years or less remaining at the date you serve your Section 42 notice, you must pay marriage value.
Marriage value is the increase in your flat’s value that results from extending the lease. The law says you and the landlord share this increase equally.
If you serve notice when your lease has more than 80 years left, you do not need to pay marriage value. This is known as the 80-year threshold.
For this reason, many leaseholders extend their lease before their term drops below 80 years to avoid this extra cost.
Example of marriage value
If your flat is worth £250,000 with 85 years left, extending it might add only a small amount to the value.
However, if it has 70 years left, it might be worth £230,000 now but £270,000 after extension. The £40,000 uplift is known as the marriage value. You would pay half (£20,000) to your landlord as part of the premium (price).
- Last updated:
- 16 December 2025
- Next review:
- 16 December 2027
Related content
What to consider before starting a lease extension and how to prepare.
Advice guideHow the informal lease extension process works and what to consider before agreeing
Advice guideStep-by-step guidance on extending your lease using the formal legal process
Advice guide