Lease Extension Calculator
Calculate the estimated cost of extending your lease based on statutory valuation methods and current case law.
Lease extension is a critical process for leaseholders looking to increase the value of their property and secure their long-term investment. When a lease drops below 80 years, the cost of extending it increases significantly due to the addition of "marriage value" to the premium calculation. The statutory lease extension process allows flat owners to extend their lease by 90 years (in addition to the unexpired term) and reduce the ground rent to zero.
The calculation of a lease extension premium is based on complex valuation principles set out in the Leasehold Reform, Housing and Urban Development Act 1993. The premium typically consists of three main components: the term (reversion) value, the ground rent value, and in cases where the remaining lease term is less than 80 years, marriage value. Professional valuers use deferment rates (typically 5%) and capitalization rates (typically 6.5%) in line with current case law to determine these values.
How to Use the Lease Extension Calculator
Step-by-Step Guide to Using the Lease Extension Calculator
Step 1: Enter Your Property Details
Input your current property value, remaining lease term in years, and annual ground rent. These are the essential values needed for a basic calculation. Make sure to use accurate figures, especially the remaining term, as this significantly impacts the premium.
Step 2: Specify Property Information
Select your property type (flat or house) and location from the dropdown menus. Different property types and locations can affect valuation parameters and relativity calculations used in determining the premium.
Step 3: Adjust Advanced Options (Optional)
Click "Show Advanced Options" to customize the deferment rate, capitalization rate, and property inflation rate. The default values (5%, 6.5%, and 3% respectively) are based on current case law and market conditions, but you can adjust these if you have specific information.
Step 4: Review Your Results
After clicking "Calculate Premium," review the three estimates provided: lower, average, and upper premium costs. The breakdown section shows how the premium is calculated, including term value, ground rent value, and marriage value (if applicable).
Step 5: Analyze Future Costs
Examine the "Cost of Waiting to Extend" section to understand how delaying your lease extension will affect the premium. This shows estimated costs if you wait 1, 2, or 5 years, helping you make an informed decision about when to proceed with your extension.