Lease extension premium: how it is worked out

Leasehold means you own a property for a fixed period, and ownership returns to the landlord when the lease ends. Most flats are leasehold. For qualifying tenants, the law gives a right to extend a lease by paying a premium, but the way that premium is worked out depends on statutory valuation rules rather than a simple fixed price.

The three parts of the premium

For a flat, the statutory premium is made up of three elements: the diminution in value of the landlord’s interest, the landlord’s 50% share of any marriage value, and any compensation payable. The diminution in value is the difference between the value of the landlord’s interest before the new lease and its value after the new lease is granted, assessed on an open-market willing-seller basis. For houses, the statutory right comes under the Leasehold Reform Act 1967, and the price is also based on an open-market willing-seller valuation with marriage value rules built in.

Marriage value and the 80-year rule

Marriage value is the difference between the combined value of all interests before and after the new lease, and the landlord’s share is 50%. Under the current statutory rules, marriage value is nil where the unexpired term exceeds 80 years. GOV.UK guidance says that when 80 years or less remain on a lease, the cost of extending it increases significantly, which reflects the point at which marriage value can enter the calculation.

The new lease terms

Under current law, a qualifying tenant of a flat who makes a valid statutory claim is entitled to a new lease at a peppercorn rent for a term expiring 90 years after the current term date. For houses, the current statutory extension term remains 50 years. The claim starts with a formal notice under section 42, the premium is fixed on the statutory basis, and disputes go to the appropriate tribunal.

Who pays the costs

Under section 60 of the 1993 Act, the tenant making a statutory lease extension claim pays the landlord’s reasonable costs of investigating the claim, obtaining a valuation for fixing the premium, and granting the new lease. The verified facts also say this does not include tribunal proceedings costs. GOV.UK also points leaseholders to the Leasehold Advisory Service lease extension calculator as the official guide to the cost of extending a flat lease.

The 2024 reform: what is not in force yet

The Leasehold and Freehold Reform Act 2024 became law on 24 May 2024, but some headline changes are not yet in force. As of August 2026, the 990-year lease extension and the removal of marriage value are not yet law in practice, so the current statutory terms remain 90 years for flats and 50 years for houses. A future costs regime is also prospective only: section 39 would replace the current section 60 approach so tenants are not liable for other people’s costs except in specified cases. One reform that has already started is the removal of the two-year ownership rule, which came into force on 31 January 2025.

Key facts

Source: GOV.UK - Extending, changing or ending a lease — Guidance checked August 2026

Source: legislation.gov.uk - LRHUDA 1993 s.60 — Guidance checked August 2026

Source: legislation.gov.uk - Leasehold and Freehold Reform Act 2024 s.55 — Guidance checked August 2026

Source: legislation.gov.uk - LRHUDA 1993 Sch.13 — Guidance checked August 2026