The complete methodology behind the LeaseVault free calculator — the same RICS framework used by professional surveyors in England and Wales.
Methodology reviewed by
James Norton MRICS — Chartered Surveyor & Registered Valuer
The LeaseVault calculator estimates the premium payable by a leaseholder to a freeholder for a statutory lease extension under the Leasehold Reform, Housing and Urban Development Act 1993. The methodology follows RICS professional guidance and the valuation principles confirmed in the landmark Lands Tribunal decision in Sportelli & Others v Cadogan [2007].
Our calculator provides an estimate for guidance purposes. A formal RICS surveyor's valuation is required before serving a Section 42 notice. Use our estimate as a starting point — not a substitute for professional advice.
Under the 1993 Act, the lease extension premium is calculated as the sum of three components:
Capitalised Ground Rent (CGR)
The present value of the ground rent the freeholder loses when it falls to peppercorn on extension. Calculated as:
Example: £250/year ground rent ÷ 5% = £5,000 capitalised ground rent
Reversion Value (RV)
The present value of the freeholder's right to receive the property back at the end of the current lease term. Calculated by discounting the freehold value back over the unexpired term at the deferment rate:
For long leases (80+ years), the reversion is heavily discounted and contributes a small amount. For short leases (below 60 years) it becomes significant.
Marriage Value (MV) — leases below 80 years only
Applies only when the unexpired term is below 80 years. Defined in Section 9(1D) of the 1993 Act as 50% of the increase in combined value of the leasehold and freehold created by the extension:
Total Premium Formula
Premium = CGR + RV + MV (if lease < 80 years)
| Parameter | Value Used | Source / Authority |
|---|---|---|
| Deferment rate (flats) | 5.0% | Sportelli v Cadogan [2007] Lands Tribunal; upheld Court of Appeal [2008] |
| Deferment rate (houses) | 4.75% | Sportelli v Cadogan [2007] Lands Tribunal |
| Relativity graph | Savills (no-Act world) | RICS guidance; commonly applied in First-tier Tribunal decisions |
| Marriage value split | 50% to freeholder | Section 9(1D), Leasehold Reform, Housing and Urban Development Act 1993 |
| Extension term | 90 years (current law) | Section 56, LRHUDA 1993 (proposed 990 years under 2026 Bill — not yet in force) |
| Ground rent post-extension | Peppercorn (zero) | Section 56(1), LRHUDA 1993 |
| Marriage value threshold | 80 years unexpired | Section 9(1D), LRHUDA 1993 |
Our calculator provides a good-faith estimate using standard RICS parameters. The actual premium in your case may differ because:
✅ How to use this estimate: Use our calculator to understand the order of magnitude of your premium before engaging a surveyor. If the figure is significant (above £10,000), instruct an ALEP-registered RICS surveyor for a formal valuation before serving a Section 42 notice.
Leasehold Reform, Housing and Urban Development Act 1993
Sections 9, 56, and Schedule 13. The primary statute governing lease extension premiums. legislation.gov.uk
Sportelli & Others v Cadogan Estates [2007] — Lands Tribunal
Landmark decision establishing the standard RICS deferment rates: 5.0% (flats) and 4.75% (houses). Upheld by the Court of Appeal [2008]. The foundation of all standard lease extension valuations.
RICS — Leasehold Reform: Guidance on Valuation
Royal Institution of Chartered Surveyors professional guidance on leasehold enfranchisement valuations, relativity, and deferment rates. rics.org
LEASE Advisory Service — How is the premium calculated?
Government-funded guidance on lease extension premium components. lease-advice.org
GOV.UK — Extending your lease
Official government guidance on the statutory lease extension process. gov.uk/leasehold-property/extending-the-lease
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