Government faces key decisions on leasehold valuation rates
12:01 AM, 26th October 2026, 3 weeks ago
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The government faces important choices about how much leaseholders will pay to extend their leases or buy their freeholds as the consultation on leasehold valuation rates closes.
The Association of Leasehold Enfranchisement Practitioners (ALEP) says the government must now decide on the rates that will help determine leaseholders’ costs, with two key percentages influencing how much they pay to freeholders.
The deferment rate calculates the present value of the freeholder’s right to regain the property when the lease expires, while the capitalisation rate converts future ground rent payments into a lump sum.
Help determine price someone pays to extend lease
ALEP director Mark Chick said: “These rates may look like a technical detail, but they help determine the price someone pays to extend their lease or acquire their freehold. The idea is that prescribing rates should make calculations more predictable and reduce the scope for some disputes. The challenge is to establish an approach supported by evidence that also recognises differences which materially affect value.
“These rates are currently set by case law and, in the case of the deferment rate, there is generally more scope for negotiation. With the proposed ground rent cap and also the assumed cap in the LAFRA valuation of 0.1% of the property’s value, the impact of the capitalisation rate is already set to be somewhat diminished.
“The government hopes that prescribing rates will be part of the process of making enfranchisement ‘cheaper and easier.’ In that context it sounds like it means that the government favours moves towards adjusting the rates in favour of leaseholders, but their eventual position remains to be seen.”
Leaseholders will gain stronger rights
At ALEP’s conference, 75% of respondents supported a distinct prescribed approach for leases with between five and 20 years remaining.
Just 10% favoured using the same benchmark as for longer leases, while 15% were undecided.
The news comes as under the Leasehold and Commonhold Reform Bill, leaseholders will gain stronger rights, including making lease extensions and freehold purchases cheaper and easier, as well as simplifying the process of converting leasehold flats to commonhold.
Tags:
freeholders, leasehold, Leasehold and Commonhold Reform Bill, leasehold enfranchisement reform, leaseholders
2 comments on this article
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Member Since January 2026 - Comments: 3
4:09 PM, 26th October 2026, About 3 weeks ago
What proportion of leased property is actually affected by these proposals?
Consider the number of leasehold properties in the north-east and north-west that are on 999 year leases from the 1800’s at ground rents of under £5 a year that never increase.
This is another example of a sledgehammer to crack a nut
And common hold isn’t going to make anything easier. I predict it’s going to make things much more difficult for the owners in a block when one or more don’t pay and they realise that they need a rolling 5 year plan to deal with maintenance. Its no wonder that leasehold flats are not selling.
Member Since October 2013 - Comments: 1805 - Articles: 3
6:50 PM, 26th October 2026, About 3 weeks ago
Reply to the comment left by Disgruntled at 26/10/2026 – 16:09
The vast majority of blocks built in the past 20 years will be affected. They won’t all be able to afford an extension, but it will affect valuations, and improve the sale and purchase possibilities. The freehold lobby wants 3% while leaseholders want 9% on both counts. Pennycook is already backsliding, and I fully expect Labour ro betray the millions of leaseholders who voted for them based on their pre-election promises.