Leasehold Calculator

Lease Extension Premium Calculator

Estimated Costs

Diminution (Landlord's Loss): £0

Marriage Value (50% share): £0

Estimated Total Premium: £0

*This is an estimate. Professional valuation and legal fees are not included. Results may vary based on local deferment rates and specific lease clauses.

function calculateLeaseExtension() { var currentValue = parseFloat(document.getElementById('currentValue').value); var years = parseFloat(document.getElementById('yearsRemaining').value); var rent = parseFloat(document.getElementById('annualGroundRent').value); var improvedValue = parseFloat(document.getElementById('improvedValue').value); if (isNaN(currentValue) || isNaN(years) || isNaN(rent) || isNaN(improvedValue)) { alert("Please fill in all fields with valid numbers."); return; } // 1. Capitalization of Ground Rent (using standard 6% cap rate) var capRate = 0.06; var capitalizedRent = rent * ((1 – Math.pow(1 + capRate, -years)) / capRate); // 2. Reversion (Deferment Rate usually 5%) var defermentRate = 0.05; var reversionCurrent = improvedValue / Math.pow(1 + defermentRate, years); var reversionPostExtension = improvedValue / Math.pow(1 + defermentRate, years + 90); var lossOfReversion = reversionCurrent – reversionPostExtension; // Diminution is the total loss to the landlord var diminution = capitalizedRent + lossOfReversion; // 3. Marriage Value (Only applies if lease is < 80 years) var marriageValue = 0; if (years 0) { marriageValue = totalValueIncrease * 0.5; } } var totalPremium = diminution + marriageValue; document.getElementById('resDiminution').innerHTML = "£" + diminution.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resMarriage').innerHTML = "£" + marriageValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resTotal').innerHTML = "£" + totalPremium.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('marriageValueRow').style.display = (years < 80) ? 'flex' : 'none'; document.getElementById('calcResults').style.display = 'block'; }

Understanding Leasehold Extensions and Costs

For many flat owners in the UK, owning a leasehold property means owning the right to occupy the building for a set period. As that timeframe decreases, the property value can drop significantly, and it becomes harder to secure a mortgage. Extending your lease is a strategic financial move to protect your investment.

How the Lease Extension Premium is Calculated

The premium you pay to your landlord (freeholder) is calculated using three main components defined by the Leasehold Reform, Housing and Urban Development Act 1993:

• Diminution of the Freehold: This compensates the landlord for the loss of ground rent they would have received and the fact that they have to wait an extra 90 years to get the property back (reversion).
• Marriage Value: This is the most critical factor for short leases. If the lease has fewer than 80 years remaining, the landlord is entitled to 50% of the "profit" created by the lease extension.
• Compensation: In rare cases, additional compensation for any loss in value to other property owned by the landlord.

The "80-Year Rule"

The 80-year mark is a financial "cliff edge." Once a lease falls below 80 years, the cost to extend increases dramatically because Marriage Value becomes payable. If your lease is at 81 or 82 years, it is highly recommended to start the extension process immediately to avoid this extra cost.

Example Calculation

Consider a property currently worth £200,000 with 75 years remaining on the lease. After extension, the property might be worth £220,000. Because the lease is under 80 years, the calculation would look like this:

1. Diminution: Based on the ground rent and the 5% deferment rate, the landlord's interest loss might be estimated at £6,500.
2. Marriage Value: The increase in value is £20,000. Subtracting the diminution (£6,500) leaves £13,500. The landlord takes 50% of this, which is £6,750.
3. Total Premium: £6,500 + £6,750 = £13,250 (plus legal and valuation fees).

Frequently Asked Questions

Do I have a right to extend?
Generally, if you have owned the leasehold for at least two years, you have a statutory right to extend your lease by 90 years and reduce your ground rent to "peppercorn" (zero).

Are there other costs?
Yes. In addition to the premium, you are typically responsible for your own legal and valuation fees, as well as the reasonable legal and valuation costs of the landlord.

Should I negotiate informally?
You can negotiate directly with the landlord, but be cautious. Informal extensions often include clauses that increase ground rent in the future, whereas the statutory route removes ground rent entirely.