Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property118. Read the original article for full details.

Government Leasehold Consultation May Affect Landlord Costs for Decades

Landlords who own leasehold flats have until 11.59 pm on 23 September 2026 to respond to a government consultation that could influence the rates used to calculate costs for lease extensions, freehold purchases, and ground rent buyouts. The consultation covers the valuation rates that will be set under the Leasehold and Freehold Reform Act 2024.

The consultation consists of 39 questions and addresses technical details that may require specialist legal and valuation knowledge. The government has stated it wants to hear from individual leaseholders, freeholders, and the professionals who advise them.

Key Changes Proposed

The Leasehold and Freehold Reform Act 2024 introduces a new Standard Valuation Method for statutory lease extensions, freehold purchases, and ground rent buyouts. Once in force, leaseholders will be entitled to 990-year lease extensions at a peppercorn ground rent. The new calculation will remove marriage value and generally cap the ground rent considered at 0.1% of the property’s freehold vacant possession value. Each party will normally pay its own legal and valuation costs, with limited exceptions subject to a separate consultation.

These changes are not yet in force. The government must first prescribe the valuation rates through regulations and address issues in the 2024 Act with further legislation. Parts of the reforms have also been challenged in the courts, and while the government won in the High Court, the decision is under appeal.

Valuation Rates Under Consultation

The consultation focuses on the capitalisation rate and the deferment rate. The capitalisation rate determines the present value of future ground rent (the “term value”), while the deferment rate values the freeholder’s right to recover possession at the end of the lease (the “reversion value”). These values are combined to calculate the premium payable by the leaseholder. For ground rent buyouts without lease extension, only the term value is relevant.

The government provides an example: for a flat worth £250,000 with 100 years remaining on the lease and a ground rent starting at £150 (increasing by £25 every 20 years), a capitalisation rate of 6% results in a present value of £2,675 for the future ground rent. A deferment rate of 5% gives a present value of £1,901 for the freeholder’s reversionary interest.

Letting agents and inventory clerks should be aware that the outcome of this consultation could affect leasehold transaction costs for years to come.