Government consultation on leasehold valuation rates: what every leaseholder should know

The government has opened an important consultation on the rates that will be used to calculate the price of statutory lease extensions, freehold purchases and ground rent buy-outs under the Leasehold and Freehold Reform Act 2024.

The subject may sound highly technical. However, the decisions taken following this consultation could have a direct and significant effect on what many leaseholders pay in future.

The consultation marks an important milestone towards bringing the new enfranchisement valuation system into force. Before that can happen, the government must prescribe the relevant rates in regulations and correct a small but significant number of technical issues in the 2024 Act through primary legislation. This is expected to happen through the forthcoming Commonhold and Leasehold Reform Bill.

Under the reformed system in the 2024 Act, known as the Standard Valuation Method, two rates will continue to be used to convert rights and income that a freeholder would otherwise have received in the future into a present value today. This will apply to most claims for lease extensions, freehold purchases and ground rent buy-outs.

• The capitalisation rate is used to value the freeholder’s right to receive ground rent during the remaining term of a lease.
• The deferment rate is used to value the freeholder’s right to regain possession of the property when the lease ends.

The broad effect of the level at which rates are set is important to understand. All other things being equal, a higher capitalisation or deferment rate will generally produce a lower premium for the leaseholder, while a lower rate will generally produce a higher premium. Even a change of one percentage point can make a meaningful difference, depending on the property value, ground rent and years remaining on the lease.

The government says the rates will be prescribed within the framework set by the Leasehold and Freehold Reform Act 2024. Among other things, this means:

• the prescribed rates are not intended, in themselves, to reduce the premiums paid by leaseholders further or to compensate freeholders for income lost as a result of other changes to the valuation process
• the government cannot set different rates for different geographical areas
• the same rates should apply to all leaseholders, whether, for example, they are resident leaseholders or buy-to-let landlords; they should also apply regardless of the type of freeholder involved, such as a private individual, charity, company or group of enfranchised leaseholders

The government is considering several approaches. For deferment rates, the consultation asks whether to:

• retain the rates established by the 2007 Sportelli legal case
• update the Sportelli approach using more recent evidence (which could increase or decrease the rate compared to the current level)
• use an alternative method

Sportelli currently provides the main benchmark for deferment rates: 4.75% for houses and 5% for flats. Departures from those rates may currently be possible in a limited number of cases where enough evidence is available. Under the Standard Valuation Method, however, it will not be possible to depart from the rates prescribed by the government.

For capitalisation rates, the consultation asks whether there should be:

• one rate for all relevant ground rents
• different rates depending on whether the rent is fixed, increases in steps, or changes by another method, such as inflation
• an alternative approach

Prescribing the rates should provide greater certainty, reduce the need for individual valuation negotiations and limit the scope for disputes. Once prescribed, they could remain in use for up to 10 years. Leaseholders will have to live with the financial impact, so it is important that their voices are heard now.

The government acknowledges that much of the consultation requires specialist legal or valuation knowledge, due to its technical nature, but it is also encouraging responses from individual leaseholders.

In particular, leaseholders may be able to comment on:

• the likely positive or negative effects of the different options
• whether a single capitalisation rate would be clearer than separate rates for different ground rent provisions
• the importance of being able to clearly understand the rate in the calculation
• how complexity or uncertainty can affect decisions about extending a lease, buying a freehold or buying out ground rent
• whether there are circumstances or practical effects that the government should consider when choosing its approach

Where relevant, you can support your response with information about your lease, such as its remaining length and how its ground rent is reviewed. Practical examples can help explain how the different approaches might affect leaseholders.

The consultation applies to England and Wales and closes at 11:59pm on 23 September 2026. Views can be submitted online.

I encourage leaseholders to watch our video, in which I discuss the proposals in greater detail with Consultant Chartered Surveyor Mark Wilson BSc MRICS. Together, we explore what the proposals could mean for leaseholders and explain how you can take part in the consultation. Although the questions are complex, nobody should feel that they need to be a lawyer or valuation expert to respond.

The government has also launched a second consultation on proposed changes to who pays the costs incurred during the enfranchisement process. Views can be submitted online.