Extending the lease on your leasehold property is one of the smartest financial decisions you will make, and a valuation is the first crucial step. It tells you what the extension will cost before you commit to anything.
Many leaseholders find the valuation process confusing. This page explains what a valuation is, what goes into the figure, and what happens next.
Understanding a Leasehold Valuation
A lease extension valuation is the outcome of a series of calculations, comparables, and qualitative analysis specific to your property and existing lease to determine the lowest amount you’ll need to pay your freeholder to extend the lease on your property.
At LEC, this work is undertaken by a leading enfranchisement specialist RICS-regulated ALEP surveyor who specialises in leasehold properties and understands the detailed legal and financial principles behind leasehold valuation.
The surveyor’s job includes the crucial estimation of the “premium” — the amount you pay to the freeholder — based on several key factors:
- Property value: What your flat or house is worth with the benefit of an extended lease.
- Unexpired lease term: How many years remain on your lease.
- Ground rent: The amount you currently pay each year.
- Marriage value: The difference between the combined values of the leaseholder’s and freeholder’s interests before and after the extension, where the unexpired term is below 80 years.
- Relativity: The difference between the value of your property with a short lease versus a long one.
- Qualitative analysis: Comparable lease extensions, the surveyor’s experience of the freeholder, any recent cases, and relevant legal outcomes.
By analysing and compiling these elements, the surveyor produces a report showing the likely premium range — the lowest and highest amounts you could expect to pay for your premium.
A Closer Look At Three Key Terms
Relativity, the deferment rate and the capitalisation rate appear in almost every valuation report, but they are rarely explained. Here is what each one means.
Relativity
Relativity is the relationship between what your flat is worth with its current short lease and what it would be worth with a long lease. Expressed as a proportion, it is one of the most impactful variables in a sub 80 year lease extension valuation.
It matters most where your lease is below 80 years, because it feeds into the marriage value calculation. Several published relativity graphs exist, produced by different bodies at different times, and they do not agree with one another. A specialist surveyor will weigh those alongside evidence specific to your building and your local market, which is why relativity is a matter of professional judgement rather than a figure to be looked up.
The deferment rate
At the end of your lease, the property reverts to your freeholder. Extending your lease pushes that date further away, and your freeholder is compensated for the delay.
The deferment rate is how a valuation converts that future benefit into a value today, on the same principle that money in the future is worth less than money now. Because the reversion is often decades away, the rate applied has a meaningful effect on the premium.
For context, the Sportelli case established benchmark deferment rates of 5% for flats and 4.75% for houses.
The capitalisation rate
Your lease obliges you to pay ground rent for the remainder of its term. When you extend, that ground rent is extinguished, and your freeholder is compensated for the income they lose.
The capitalisation rate converts those future ground rent payments into a single present-day sum. Ground rent that escalates, or that would have run for a long remaining term, is worth more to a freeholder and therefore costs more to extinguish. An experienced specialist surveyor will negotiate rates that reflect prevailing market conditions.
Why an Accurate Valuation Matters
When you extend your lease using the statutory process under the Leasehold Reform, Housing and Urban Development Act 1993, the first formal step is serving a Section 42 Notice on your freeholder.
This notice must include the premium you are offering to pay, and it is recommended that this is supported by professional valuation advice. If you guess or rely on an informal estimate, you could face problems later on:
Too low, and your freeholder may try to reject your offer outright.
Too high, and you risk paying more than necessary.
An accurate, professional valuation gives you a realistic starting point and ensures you’re negotiating from a position of strength. It also helps your solicitor and surveyor guide you through the process with confidence, avoiding unnecessary disputes or delays.
What Happens When Your Freeholder Values Your Flat
Your freeholder will obtain their own valuation report as part of the statutory process under the Leasehold Reform, Housing and Urban Development Act 1993. A valuation for the purpose of a lease extension is not simply arithmetic. It rests on professional judgement, evidence, and on judgements regarding relativity where informed specialist surveyors can hold different, defensible views. Two competent surveyors can look at the same flat and reach different conclusions, and to some extent this will be determined by their experience and level of expertise, which is why using an experienced specialist surveyor is a crucial part of your lease extension.
Often the gap between both parties’ valuations is the starting point when negotiations are required. What decides where within that gap you land is the quality of the evidence behind your figure, and the experience of the surveyor who prepared it.
This is precisely why it matters who carries out your valuation. Our surveyors specialise in leasehold work and do this daily, and they know the freeholders, the comparables and the recent cases that carry weight. Our case studies show what that looks like in practice.
How LEC Makes Things Simple
At The Lease Extension Company, we know that starting your lease extension can feel overwhelming, especially when unfamiliar terms like marriage value or relativity appear in reports.
That’s why we make things straightforward from day one.
Our specialist surveyors are the leading experts in the country and will:
- Carry out a comprehensive valuation report.
- Explain each part of the calculation in plain English.
- Advise on the right premium figure to include in your Section 42 Notice.
Once your valuation is complete, our expert team handles the entire process — from our specialist solicitors serving the S42 notice, validating and responding to the S45 counter notice, agreeing the terms, approving the draft lease, and completing your lease extension.
We’ll keep you fully informed, so you always know what’s happening and what each step means. With our fixed-fee service, there are no hidden surprises. Just clear, transparent pricing and reliable leasehold advice from start to finish.
What your valuation costs, and who pays for what
At LEC, your valuation is built into our money-saving fixed fee, so you know your professional fees with certainty before starting the process.
Under the statutory route in the Leasehold Reform, Housing and Urban Development Act 1993, you are also legally responsible for your freeholder’s reasonable valuation costs. This can often be a surprise when you start to look at the costs of extending your lease. However, your freeholder needs their own valuation in order to respond to your notice with a considered counter-offer, and that is in your interest as much as theirs.
What you do not pay for is your freeholder’s negotiations. Once both sides have a valuation and the freeholder’s S45 counter notice has been received, if negotiations are required then this cost must be paid by the freeholder. If the freeholder knows the surveyor on the other side is likely to be a specialist in this area, the freeholder may be inclined not to incur additional costs in negotiations.
When Should You Get Your Lease Extension Valuation?
Buyer expectations have shifted, and requests to extend are now being made even where more than 90 years remain, a term that historically would have been considered sufficient. Whatever your remaining term, it is worth planning your extension early.
Once your term drops below 80 years, marriage value becomes payable, which will significantly increase the premium, often more than doubling what you’ll owe your freeholder.
Acting early means you can:
- Avoid the introduction of marriage value
- Preserve your property’s resale value
- Keep your extension costs lower and more predictable
Getting a valuation early helps you make informed decisions and plan your finances before the lease term drops too far.
To get an estimation of your likely premium, use our helpful free online lease extension calculator.
Please note that our calculator will give you a general estimate of the premium for a lease extension and is based on data available on a national level. It does not take into account local factors, comparables and other elements that may impact the premium and can only be achieved via a professional specialist valuation.
One more point on timing
Valuations and notices take time to prepare properly, both to ensure they are valid and to make sure the premium you pay is the lowest properly evidenced figure available to you. If your lease is close to 80 years, that time matters.
It is also worth getting a valuation as soon as possible if you are thinking of selling. The length of your lease affects what buyers will pay and what lenders will lend against, and knowing the extension cost puts you in control of that conversation.
How the pending reforms could affect your valuation
The Leasehold and Freehold Reform Act 2024 is law, but many parts of it are not yet in force in practice, including its valuation provisions. Until the new valuation provisions are determined and commence in legal practice, valuations continue to be carried out under the Leasehold Reform, Housing and Urban Development Act 1993.
You can find out the latest position on our leasehold reform page, which we update as the position changes.
Key Takeaway
A lease extension valuation is much more than just numbers. It is the foundation of a smooth extension and the single best way to keep your costs to a minimum.
Frequently asked questions
How do I find out how much a lease extension will cost?
Our lease extension calculator will give you an educated estimate at this stage. For the specific figures for your property’s lease, using both the quantitative and qualitative elements to evidence the lowest possible cost for your lease extension and the details required to serve your S42 notice, our specialist enfranchisement surveyors will undertake your valuation at the start of your lease extension.
Does a lease extension add value?
In most cases yes. A longer lease typically increases the property’s value by more than the total cost of extending the lease. Extending your lease will also improve both the mortgageability and the saleability of the property. How much it adds depends on the property, the area and wider market conditions.
How much does it cost to extend a lease to 999 years?
Under the statutory route, a flat owner is entitled to 90 years on top of the existing term. Leases of 990 or 999 years are typically possible where the leaseholder owns a share of the freehold, or by informal negotiation with the freeholder. Currently, under the Leasehold Reform, Housing and Urban Development Act 1993, the freeholder is not obliged to grant one.
How much does a lease extension surveyor typically cost?
At LEC, your valuation is included in our fixed fee. Based on the thousands of lease extensions we handle, current market valuation costs range from £500 to £1,700 for each party. Under the statutory route you will usually pay your freeholder’s reasonable valuation costs as well as your own. Fees vary with the property, its location and the complexity of the case. Your freeholder’s recoverable valuation and legal costs must be reasonable, and you may challenge them if they appear excessive.
How long is a valuation valid for?
A valuation reflects market conditions and the unexpired lease term at the valuation date, both of which change after the valuation report is issued. A report more than six months old is worth revisiting before serving notice.
Speak with a Lease Extension Specialist Today
Arrange an appointment with our team of specialist lease extension experts, or call us for free on 0800 098 2770.
