The government's consultation on the deferment and capitalisation rates that will set future lease extension and freehold premiums now closes on 21 October 2026. Here is what the rates do, what is proposed and how to respond.
The government is asking for views on two numbers that will decide how much leaseholders pay to extend a lease or buy their freehold once the valuation reforms in the Leasehold and Freehold Reform Act 2024 come into force. The consultation on deferment and capitalisation rates opened on 15 July 2026 and was due to close on 23 September. It has been extended by four weeks and now closes at 11:59pm on 21 October 2026.
These rates sound technical, and they are. But a single percentage point either way can move a premium by thousands of pounds, so this is one consultation where leaseholders' views genuinely count.
The 2024 Act introduces a new way of calculating premiums. Marriage value is removed, and the ground rent used in the calculation is capped at 0.1% of the freehold value of the property. These changes are law but are not yet in force. The government has said the new valuation method cannot be brought into force until the Secretary of State has prescribed the deferment and capitalisation rates in secondary legislation, and until flaws in the 2024 Act have been fixed by a further Act, the Commonhold and Leasehold Reform Bill. Today, premiums are still calculated under the old rules, with rates argued case by case.
Once set, the rates must be reviewed every 10 years.
A premium mainly compensates the freeholder for two things it gives up.
Both rates work the same way: they discount future money back to the present. A higher rate means a lower premium; a lower rate means a higher premium. That is why the choice matters so much.
An illustrative example, using a flat worth £250,000 with 70 years left on the lease. These are simplified figures for the two main components only, not a premium quote.
| Rate used | Illustrative value |
|---|---|
| Reversion at a 4% deferment rate | £16,055 |
| Reversion at a 5% deferment rate | £8,217 |
| Reversion at a 6.3% deferment rate | £3,472 |
| Ground rent of £250 a year at a 6% capitalisation rate | £4,096 |
| Ground rent of £250 a year at a 7% capitalisation rate | £3,540 |
On these assumptions, moving the deferment rate from 5% to 4% roughly doubles the reversion value, while moving it to 6.3% more than halves it. Over a long unexpired term, small changes in the rate have a large effect.
The government says it is neutral on the outcome. It states that the rates are intended to value the freeholder's interest fairly, not to be used as a further way of reducing premiums. It sets out options and asks consultees to rank them.
The consultation notes that tribunals have typically used capitalisation rates of 6% to 7%, averaging around 6.5%. It also asks whether views would change if the proposed £250 a year ground rent cap were introduced. That cap is only a proposal in the draft Commonhold and Leasehold Reform Bill and is not law.
Anyone can respond: leaseholders, freeholders, valuers and advisers. You do not have to answer every question. You can respond through the online consultation form or by email to LFRAratesconsultation@communities.gov.uk. The full documents, including the deferment rates report and a plain English explainer, are on the GOV.UK consultation page.
If you are a leaseholder, it is worth saying briefly who you are, how long is left on your lease, and what a higher or lower premium would mean for you in practice.
This consultation matters more than much of the headline reform. Abolishing marriage value was the promise; the deferment rate will decide how much of that promise reaches leaseholders' pockets. Leaseholders should also keep it in perspective. The new method is not in force, no commencement date has been fixed, and the rates themselves are undecided. If your lease is approaching 80 years, read our guide on whether to extend now or wait for leasehold reform, and use our lease extension calculator for an idea of today's cost.
If you would like advice on extending your lease, find out more about our lease extension service or call us on 020 3540 9996.
This article is general information, not legal advice. Accurate as at 1 October 2026.
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