How Much Does a Lease Extension Cost in 2026?

What Determines the Cost of a Lease Extension?

The premium you pay to extend your lease is not a fixed percentage of your property value. It is calculated using a formal surveyor formula that weighs up what the freeholder loses by granting the extension. Understanding these components helps you budget accurately and negotiate effectively.

There are three core elements in a standard lease extension premium calculation:

1. **Ground rent capitalisation** — the present value of the ground rent income the freeholder will lose if the ground rent is reduced to a peppercorn on completion.

2. **Reversion value** — the present value of receiving the property back at lease expiry, discounted to today using the deferment rate.

3. **Marriage value** — historically, the uplift in property value created by the extension itself, of which the freeholder was entitled to 50%. This has now been **abolished** for residential leases under the Leasehold and Freehold Reform Act 2024.

The Deferment Rate

The deferment rate is the rate at which the freeholder's future interest in the property is discounted back to a present-day value. RICS guidance has traditionally used rates of approximately 5% for houses and 4.75% for flats, though these figures are contested and regularly tested at the First-tier Tribunal. A lower deferment rate increases the premium; a higher rate reduces it.

Ground Rent Capitalisation

Ground rent capitalisation converts the future stream of ground rent payments into a single lump sum. If your ground rent is £250 per year and the capitalisation rate is 5%, the capitalised value is £5,000. On completion of the extension, the ground rent is reduced to a peppercorn (effectively nil), so the freeholder loses this income — and you compensate them for it within the premium.

Impact of Marriage Value Abolition

Before the Leasehold and Freehold Reform Act 2024, leases with fewer than 80 years remaining attracted a marriage value surcharge. This was typically the largest single component of the premium for short leases, often adding tens of thousands of pounds. Its abolition makes short-lease extensions substantially cheaper. On a flat worth £400,000 with 72 years remaining, the saving could easily exceed £30,000.

A Worked Example

Consider a flat worth £350,000 with a £200 per year ground rent and 75 years remaining on the lease. Using broadly typical assumptions:

• **Ground rent capitalisation:** £200 ÷ 5% capitalisation rate = £4,000
• **Reversion value:** £350,000 discounted at 4.75% over 75 years ≈ £8,800
• **Marriage value:** £0 (abolished under the 2024 Act)
• **Estimated premium: approximately £12,800 – £15,000**

This is a simplified illustration. A qualified RICS valuation surveyor should always be instructed for the formal premium calculation.

Professional and Legal Fees

Beyond the premium itself, budget for:

• Your surveyor's fees: £600–£1,200 for a valuation; more if the case goes to tribunal
• Your solicitor's fees: £1,000–£2,000
• The freeholder's reasonable legal and surveyor fees (payable by you under the 1993 Act statutory route)
• Land Registry registration fee

Use the Calculator

To get an indicative estimate before instructing professionals, try our [Lease Extension Calculator](/lease-extension-calculator). It uses the same core formula and lets you adjust the deferment and capitalisation rates to see how sensitive your premium is to each variable.

When to Instruct a Surveyor

Get a RICS-qualified surveyor involved before you serve a Section 42 notice. The initial notice fixes the premium you are proposing, and starting too low or too high can complicate negotiations. Most leaseholders instruct a surveyor who specialises in leasehold enfranchisement — ask whether they are a member of the Association of Leasehold Enfranchisement Practitioners (ALEP).