Government faces key decisions on leasehold valuation rates
12:01 AM, 26th October 2026, 5 hours ago
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.
