The change of Prime Minister, with Andy Burnham taking office in July 2026, inevitably raises the question of whether the new Government will accelerate implementation of the long-awaited reforms contained in the Leasehold and Freehold Reform Act 2024.

For leaseholders waiting for the abolition of marriage value and the other major enfranchisement reforms, the indications so far are encouraging. The Government had already begun the work necessary to implement the new valuation regime by consulting on the deferment and capitalisation rates that will be prescribed under the Act. Importantly, it has also indicated that this work is being undertaken in advance so that the new valuation system can be introduced quickly once the remaining legislative obstacles have been dealt with:

“We will consult upon and prescribe capitalisation and deferment rates well in advance of those fixes being made, so that once they are, we will be able to swiftly implement a new valuation process that removes the requirement for marriage value to be paid and caps the treatment of ground rents in the valuation calculation at 0.1% of the freehold value.” Housing Minister speech on Leasehold and Commonhold Reform - GOV.UK

That is a potentially important statement of intent. Rather than waiting until all of the necessary corrections to the 2024 Act have been enacted before beginning work on the valuation regulations, the Government appears to be seeking to have the new rates ready so that the new regime can be brought into effect without a further lengthy delay.

The Government has now opened its consultation on the deferment and capitalisation rates to be used under the new valuation system introduced by the Leasehold and Freehold Reform Act 2024.

These rates may sound technical, but they will directly affect how much a leaseholder pays to extend their lease, buy a freehold or buy out ground rent. Even a movement of half of one percentage point can change the premium by thousands of pounds.

The central question for leaseholders and landlords is therefore straightforward: where is the Government likely to set the rates?

The consultation does not identify preferred figures. However, the Government’s repeated promise that its reforms will make enfranchisement “easier and cheaper”, together with its own worked examples, makes it politically difficult to envisage rates being selected that deliberately increase premiums for significant numbers of leaseholders.

There is, however, an important qualification. The consultation materials do not give an absolute promise that no individual leaseholder will ever pay more. Indeed, the Government acknowledges that simplifying the present system could produce gains and losses in particular cases. The more realistic expectation is that the new package will be designed to make enfranchisement cheaper overall, while reducing professional costs and valuation disputes.

The Government’s repeated promise of cheaper enfranchisement

The language used by successive Ministers has been unusually consistent.

During the passage of the legislation, the Government described its objective as being:

“to make it cheaper and easier for leaseholders to extend their lease or acquire their freehold.”

The Minister explained that this was particularly intended to help short-lease owners who were unable to extend because of the “prohibitive marriage value” payable under the existing system.

The Government also said in the Commons:

“We are making it cheaper and easier for leaseholders in houses and flats to extend their lease or buy their freehold.”

That statement was linked expressly to the 990-year lease extension, the removal of the two-year ownership rule and the broader valuation reforms.

The present Government has adopted the same commitment. In his statement launching the July 2026 consultations, Housing Minister Matthew Pennycook said that the Government needed to implement measures in the 2024 Act that:

“will make it easier and cheaper for leaseholders to extend their lease or buy their freehold”.

He also described the proposed £250 ground-rent cap as a measure that would “further reduce the cost of enfranchisement for many leaseholders”.

In an April 2026 speech, the Minister similarly explained that the new valuation process would remove marriage value, cap the ground rent taken into account in the valuation at 0.1% of the freehold value and, together with the proposed ground-rent cap, reduce enfranchisement costs for many leaseholders.

That history matters. It would be difficult for the Government to claim that it had delivered cheaper enfranchisement if the abolition of marriage value were then materially offset by setting deferment or capitalisation rates that increased the remaining parts of the premium.

What do the rates actually do?

A statutory premium usually contains two principal elements.

The first is the term value. This compensates the landlord for losing the ground rent that would otherwise have been received during the remaining lease term. The capitalisation rate is used to convert that future rent into a present lump sum.

The second is the reversion value. This represents the present value of the landlord’s right to recover the property when the existing lease expires. The deferment rate is used to discount that future value back to today.

The basic direction of travel is:

• a higher deferment rate produces a lower reversion value and therefore a lower premium;
• a lower deferment rate produces a higher reversion value and therefore a higher premium;
• a higher capitalisation rate reduces the present value of the ground rent and therefore lowers the premium;
• a lower capitalisation rate increases the value attributed to the rent and therefore raises the premium.

The consultation confirms that these rates are intended to create a discounting effect when future rent and future ownership rights are converted into today’s values. (GOV.UK)

The deferment rate: why 5% is the crucial benchmark for flats

The present starting point derives from the decision in Sportelli. The Government’s impact assessment uses:

• 5% for flats; and
• 4.75% for houses

as the current baseline rates.

This is significant because the Government’s own figures show that prescribing a deferment rate below 5% for flats would increase the reversion element of the premium, while prescribing a rate above 5% would reduce it.

The consultation presents three broad choices:

1. retain the existing Sportelli rates;
2. update the Sportelli methodology using more recent economic evidence; or
3. adopt an alternative approach.

No preferred option is stated. Nevertheless, the worked figures make the political consequences of each choice very clear.

Example 1: a £250,000 flat with 100 years remaining

The Government considers a flat worth £250,000 after extension, with 100 years remaining on the existing lease.

At the current 5% deferment rate, the reversion value is calculated at £1,901.

If the rate were reduced to 4%, the reversion value would rise to £4,950. The leaseholder would therefore pay approximately £3,049 more for this element of the premium.

If the rate were increased to 6%, the reversion value would fall to £737. The leaseholder would pay approximately £1,164 less.

The full range shown in the Government’s table is striking:

Deferment rate	Reversion value
3%	£13,008
4%	£4,950
5%	£1,901
6%	£737
7%	£288

A reduction from 5% to 4% increases the reversion value by approximately 160%. An increase from 5% to 6% reduces it by approximately 61%.

This demonstrates why a seemingly small change in the prescribed percentage has such a pronounced effect when it’s applied over a century.

It also illustrates why a deferment rate below the existing 5% benchmark would sit uneasily with the Government’s promise of cheaper enfranchisement. Although the abolition of marriage value could still leave many short-lease owners better off overall, reducing the deferment rate would increase this part of the price for every affected flat.

Example 2: the same flat with 80 years remaining

The effect is greater in cash terms where the lease is shorter.

For the same £250,000 flat with 80 years remaining, the reversion value at 5% is £5,044.

At 4%, it increases to £10,846, adding approximately £5,802 to the leaseholder’s premium.

At 6%, it falls to £2,363, saving the leaseholder approximately £2,681.

Deferment rate	Reversion value
3%	£23,494
4%	£10,846
5%	£5,044
6%	£2,363
7%	£1,115

The Government describes a move from 5% to 4% as causing a 115% increase in the reversion value. Moving from 5% to 6% produces a 53% reduction.

These figures concern only the reversion element. In an actual claim, the term value, any applicable compensation and, until the new regime starts, marriage value may also be relevant.

The nationwide effect would be enormous

The Government has also modelled the aggregate effect across flat lease extensions over ten years.

Using the present 5% deferment rate as the baseline:

• prescribing 4.5% could cause leaseholders collectively to pay approximately £900 million more;
• prescribing 4% could increase aggregate premiums by approximately £2.1 billion;
• prescribing 3% could increase them by approximately £6.3 billion;
• prescribing 5.5% could reduce premiums by approximately £600 million;
• prescribing 6% could reduce them by approximately £1.1 billion; and
• prescribing 7% could reduce them by approximately £1.7 billion.

These are modelled transfers between leaseholders and landlords, rather than changes in the total value of the economy. A saving for leaseholders is an equivalent reduction in the value received by landlords.

This modelling strengthens the argument that it would be politically surprising for the Government to select a flat deferment rate materially below 5%. Doing so would knowingly transfer very substantial sums from leaseholders to landlords despite the central promise that enfranchisement would become cheaper.

The more plausible possibilities appear to be:

• retaining 5% for flats;
• prescribing a modestly higher rate; or
• recalculating the rate under an updated methodology that does not produce a material increase in premiums overall.

That remains an inference rather than an announced policy. The consultation expressly states that no preferred option has yet been selected.

Capitalisation rates are more complicated

The position with capitalisation rates is less straightforward because there is no single present market rate.

Different rates are currently applied to different ground-rent structures. A fixed rent of £50 a year may be valued differently from an RPI-linked rent or one that doubles periodically.

The Government is considering whether to prescribe:

• one rate for all rents;
• three rates depending on the type of rent review; or
• some alternative structure.

A single rate would be easiest to understand and would remove most scope for argument. However, it would inevitably value some rents more generously and others less generously than under current practice.

The consultation uses 7% in its capitalisation examples but expressly warns that both the assumed current rates and the 7% figure are illustrative and do not indicate the rate likely to be prescribed.

Example 3: fixed ground rent of £50 a year

For a property with 100 years remaining and a fixed ground rent of £50 a year, the Government calculates the term value as follows:

Capitalisation rate	Term value
4%	£1,225
5%	£992
6%	£831
7%	£713
8%	£625
9%	£555

Suppose the rent would currently have been valued using 9%, giving a term value of £555. If the Government instead prescribed a universal 7% rate, the term value would become £713.

The leaseholder would therefore pay £158 more, with the landlord receiving the same amount more.

This is precisely the kind of case that prevents anyone from guaranteeing that no individual leaseholder could pay more under a simplified single-rate system.

Example 4: an escalating ground rent

The second example starts at £150 a year and increases by £25 every 20 years.

The term values are:

Capitalisation rate	Term value
4%	£3,981
5%	£3,195
6%	£3,060
7%	£2,606
8%	£2,265
9%	£2,002

If this rent would currently be valued at 6%, its term value would be £3,060. At a prescribed 7%, it would fall to £2,606.

The leaseholder would therefore save £454, with the landlord receiving £454 less.

The same universal rate could consequently make one leaseholder pay slightly more and another pay less.

Example 5: an inflation-linked rent limited by the 0.1% cap

In the third example, the rent would otherwise rise from £200 to £421 at the next review. However, the new statutory valuation cap limits it to £252.52 for the remainder of the lease.

The term value is:

Capitalisation rate	Term value
4%	£6,188
5%	£5,012
6%	£4,196
7%	£3,603
8%	£3,155
9%	£2,805

The Government assumes that, once the 0.1% cap is taken into account, the current market might also apply 7%. On that assumption, prescribing 7% creates no additional transfer: the term value remains £3,603.

This example shows that the capitalisation rate cannot sensibly be considered in isolation. The 0.1% ground-rent valuation cap will itself reduce the amount of rent included in many calculations.

What do the examples suggest about the likely rates?

The deferment-rate examples provide the clearest indication.

For flats, 5% is the existing benchmark. Any rate below it would increase the reversion value and viewed in isolation, increase leaseholders’ premiums. Any rate above it would reduce them.

Given the Government’s repeated commitment to cheaper enfranchisement, it seems unlikely that Ministers would knowingly prescribe a materially lower rate unless they could show that the overall statutory package still produced sufficiently large savings for affected leaseholders.

There is also a presentational problem. It would be difficult to explain why a reform promoted as making lease extensions cheaper had selected a rate which, in the Government’s own example, added £5,802 to the reversion value of a £250,000 flat with 80 years remaining.

For capitalisation rates, the position is less clear. This is because existing rates vary according to the rent, almost any single prescribed rate would produce some individual winners and losers. That may encourage the Government to use more than one rate—for example, separate rates for fixed, escalating and inflation-linked rents—rather than one universal figure.

That would reduce the risk of individual leaseholders paying more simply because their existing rent falls on the wrong side of a single prescribed rate. The disadvantage is that multiple rates would preserve some complexity and scope for disagreement.

Why the consultation cannot be treated as a guarantee

Despite the political direction of the reforms, the formal consultation language is cautious.

The Government says that its aim is to set rates that “reasonably find the present value” of the landlord’s rent and reversion, while providing simplicity, certainty and stability.

The impact assessment goes further. It states that the Secretary of State will prescribe rates reasonably reflecting present value “regardless of the price of enfranchisement and resultant transfers” shown in the modelling.

That language appears designed to show that the eventual rates will be evidence-based rather than selected solely to achieve a predetermined reduction in landlords’ compensation.

It means that the political promise of cheaper enfranchisement must be understood as applying to the reform package as a whole. That package includes:

• abolition of marriage value;
• the 0.1% ground-rent cap in valuation;
• 990-year statutory lease extensions;
• the general rule that each side bears its own non-litigation costs;
• proposed mandatory leasebacks; and
• the proposed £250 cap on existing ground rents.

Some leaseholders—particularly those with leases below 80 years—may obtain very substantial savings from the abolition of marriage value. Others with long leases and modest fixed rents may see much smaller changes.

What this means for landlords

For landlords, the consultation confirms that the choice of rates is not simply an administrative matter. It will determine the present value attributed to billions of pounds of future ground rents and reversions.

A higher deferment or capitalisation rate reduces the relevant part of the premium received by the landlord. A lower rate increases it.

Landlords can therefore be expected to argue that the rates must reflect genuine investment risk and market evidence, rather than being used as an additional mechanism for reducing premiums after Parliament has already abolished marriage value and capped the treatment of ground rent.

The Government will also need to ensure that the regulations withstand the continuing human-rights challenge to the valuation reforms.

Conclusion

The Government has consistently promised to make lease extensions and freehold purchases easier and cheaper. That commitment strongly suggests that Ministers will be reluctant to prescribe valuation rates which increase premiums for leaseholders generally.

The deferment-rate modelling makes 5% for flats the key dividing line. A figure below 5% would increase the reversion element compared with the Government’s baseline; a figure above 5% would reduce it. On the political direction presently indicated, retaining 5% or moving modestly above it appears more plausible than prescribing a materially lower figure.

Capitalisation rates are harder to predict. The consultation’s 7% examples are expressly illustrative and should not be mistaken for a preferred rate. Because existing market rates differ according to the type of ground rent, the Government may favour several prescribed rates to reduce the number of individual leaseholders who would otherwise pay more under a single-rate system.

The strongest conclusion is therefore not that every leaseholder is guaranteed a lower premium. It is that a valuation system producing widespread increases would be extremely difficult to reconcile with the repeated ministerial promise that enfranchisement will become cheaper.

We will have to watch this space.