Open consultation

Leasehold enfranchisement valuation rates

Published 15 July 2026

Applies to England and Wales

Scope of the consultation

This consultation seeks views on exercising the powers contained in the Leasehold and Freehold Reform Act 2024 (“LFRA 2024”) that allow the Secretary of State to set the capitalisation and deferment rates.

These rates are to be used as part of the amended valuation scheme in the LFRA 2024 (known as the Standard Valuation Method), for the calculation of how much a leaseholder pays to exercise their statutory rights to buy their freehold, extend their lease, or buy out their ground rent liability.

It asks for views on the following:

• setting the capitalisation rate
• setting the deferment rate

Geographical scope

These proposals relate to England and Wales.

Impact assessment

An impact assessment has been published alongside this consultation to provide consultees with financial and economic modelling of the options discussed in this consultation document. The information gathered through this consultation process will inform the government’s final policy position, prior to setting the rates in secondary legislation.

Body responsible for the consultation

 The Ministry of Housing, Communities and Local Government (MHCLG).

Duration

The consultation is open for 10 weeks and will close at 11:59pm on 23 September 2026

Enquiries

For any enquiries about the consultation please contact:  LFRAratesconsultation@communities.gov.uk.

How to respond

You may respond by completing an online survey at Citizen Space:

Alternatively, you can email your response to the questions in this consultation to LFRAratesconsultation@communities.gov.uk.

When you respond it would be very useful if you confirm whether you are responding as an individual or submitting an official response on behalf of an organisation, and if so, include the name of the organisation and your position.

Ministerial foreword

The current leasehold system in England and Wales has a number of fundamental, structural flaws that mean it is weighted against the interests of leasehold homeowners. These include the fact that third-party landlords often exercise control over the management, shared facilities and related costs of buildings rather than leaseholders themselves. Leaseholders do not own their homes forever and their value tends to fall over time as the years remaining on leases reduce.

Enabling leaseholders to exercise greater control over the buildings they live in, and have paid for, is integral to transforming the experience of home ownership for millions of leasehold homeowners across the country. Leasehold enfranchisement is a key means of asserting control over building management, providing increased security and boosting the value of individual leasehold properties. However, as things stand, the process of exercising the right to extend a lease or buy a freehold is onerous, slow, costly, and weighted towards landlords and freeholders.

The Leasehold and Freehold Reform Act 2024 sought to improve the position for leaseholders looking to enfranchise. This government has already switched on several of its provisions, including expanding the scope of enfranchisement so that leaseholders who have owned the lease of their house or flat for less than two years now qualify to buy their freehold or extend their lease.

The 2024 Act also provides for 990-year lease extensions at a peppercorn ground rent and includes powers to establish a new valuation process that will make it easier and cheaper for leaseholders to enfranchise. The new method for calculating the price of a statutory lease extension or freehold acquisition removes the requirement for marriage value to be paid, caps the treatment of ground rents in the valuation calculation at 0.1% of the freehold value, and allows the government to prescribe the deferment and capitalisation rates used to calculate the enfranchisement premium, thereby simplifying the enfranchisement process and making it less contentious.

As we have repeatedly made clear, we cannot commence these enfranchisement provisions without rectifying a small number of specific flaws in the 2024 Act through primary legislation. We intend to make the necessary fixes through the substantive Commonhold and Leasehold Reform Bill to be introduced in the coming months.

To ensure we can bring the new enfranchisement process into force in a timely manner once those fixes have been made, we need to determine appropriate deferment and capitalisation rates. Setting these rates is a technically complex exercise and we recognise that engaging with much of the detail in this consultation will require specialist legal and valuation knowledge. Nonetheless, we strongly encourage input from all parties affected, including individual leaseholders and freeholders, so that the government’s final decisions are informed by views beyond simply enfranchisement professionals. We look forward to receiving your feedback.

Matthew Pennycook MP

Minister of State for Housing and Planning

Glossary

Term	Definition
0.1% cap on ground rent	A provision in the LFRA 2024 that caps the amount of ground rent used in the term value calculation at 0.1% of the freehold vacant possession value.
Applicable rates	The capitalisation rates and deferment rates that are to be prescribed by the Secretary of State and to be used to calculate the premium. (See also “capitalisation rate”, “deferment rate”).
Capitalisation rate	A rate used to ascertain the term value. (See “Term value” and “Applicable rates”)
Deferment rate	A rate used to ascertain the reversion value. (See “Reversion” and “Applicable rates”)
Enfranchisement rights	Statutory rights to purchase freehold, extend a lease or buy out ground rent liabilities.
Freeholder	The owner of a property and the land on which it is erected, in perpetuity, as shown in the freehold title. (See also “landlord”).
Freehold ownership	Ownership that lasts forever and gives extensive control.
Freehold vacant possession (FHVP) value	The value of a property if held by the freeholder with vacant possession and not subject to leasehold interests or tenancies.
Ground rent	A regular payment which a leaseholder is required by their lease to pay to the landlord. Ground rents can be “fixed” (for instance, £300 per annum), subject to a simple review (for example, increasing by £50 per annum every 25 years), or subject to a “dynamic” review (for instance, increasing in line with the Retail Prices Index). Ground rents can also be nil financial value, i.e. a peppercorn.
Ground rent cap	The government’s proposal, published on 27 January 2026, to legislate to limit ground rents in long residential leases not covered by existing legislation to £250 a year, moving to a peppercorn rent after 40 years.
Landlord (see also “Freeholder”)	A person who owns an interest in property out of which a lease has been granted. A landlord may be either the freeholder of the property or hold a leasehold interest in whole or part of the property.
Lease (long lease)	A long lease is a legal document granting a leaseholder a right to occupy the property for a specified period of time. The lease sets out the rights and obligations of the landlord and leaseholder. A long lease is one originally granted for a term exceeding 21 years.
Leasehold and Freehold Reform Act 2024 / LFRA 2024	Primary legislation reforming the enfranchisement system.
Leasehold legislation	The Leasehold Reform Act 1967 (which applies to houses), the Leasehold Reform, Housing & Urban Development Act 1993 (which mainly applies to flats) and LFRA 2024.
Leasehold value	The value of the right to occupy the property at a rent and under the terms of the lease, for the remainder of the term of the lease.
Leaseholder	Person who owns property on a long lease.  (In legislation, a leaseholder is typically termed as a “tenant”).
Marriage value	The additional value released when two or more interests (usually the freeholder’s and the leaseholder’s) are merged or “married”.  As a result of the LFRA 2024 (once in force), a leaseholder will no longer be required to pay for marriage value when exercising enfranchisement rights.
Non-litigation costs (process costs)	Professional fees in relation to the exercise of enfranchisement rights, excluding litigation e.g., conveyancing and valuation.
Peppercorn rent	A rent with zero financial value. Lease extensions under the Leasehold and Freehold Reform Act 2024 will only require a peppercorn rent.
Premium / price paid	The lump sum paid to exercise enfranchisement rights under the LFRA 2024.
Prime Central London (PCL)	High-value areas in London such as Kensington, Chelsea, Mayfair.
Reversion / Reversion value	The present value of the landlord’s right to take possession of a property at the end of a long lease.
Sportelli (case)	A Tribunal decision establishing guidance on deferment rates (Earl Cadogan v Sportelli [2007] 1 EGLR 153).
Standard Valuation Method	The compulsory method for determining a premium under the LFRA 2024.
Term value	The present value of a landlord’s right to receive ground rent through the duration of a lease.
Tribunal	First-tier Tribunal (Property Chamber) in England, or a Leasehold Valuation Tribunal in Wales. On appeal, the Upper Tribunal (Lands Chamber).
Unexpired term	The remaining time until a lease ends.
Valuation	The process of calculating the price or premium for enfranchisement claims.

About you questions

Question 1

Are you responding to this consultation as an individual or on behalf of an organisation?

• individual
• on behalf of an organisation

Individuals

Question 2

If you are an individual, what is your name and email address?

Question 3

Please confirm what type of individual you are:

• a leaseholder in a flat
• a leaseholder in a leasehold house
• a freeholder
• an intermediate landlord
• a legal representative
• a valuer
• other (please specify)

If you answered “other” please provide further details:

Organisations

Question 4

If you are responding on behalf of an organisation, please provide the following details:

• organisation name
• organisation contact details

Type of organisation:

• leaseholder representation group
• residents’ management company/Right to Manage company
• share of freehold leaseholders, who own their block of flats collectively
• freeholder
• charity-entity freeholder
• freeholder representation group
• intermediate landlord (head lessee)
• valuer
• law firm
• housing association
• local authority
• professional body
• government body
• trade association
• other type (please specify)

If you answered “other” please provide further details:

How many employees does your organisation have?

Leaseholders

Question 5

Where is your flat or leasehold house located? (If more than one property is owned, select other).

• North East England
• North West England
• Yorkshire and the Humber
• East Midlands
• West Midlands
• East of England
• London (Greater London)
• London (Prime Central)
• South East England
• South West England
• Wales
• other  (please specify)

If you answered “other” please provide further details.

Freeholders/intermediate landlords

Question 6

How many residential leases (flats and houses) are you the landlord of?

• 0 to 24
• 25 to 49
• 50 to 99
• 100 to 249
• 250 to 499
• 500 to 999
• 1000+

Question 7

In what region are the majority of the properties in your portfolio based?

• North East England
• North West England
• Yorkshire and the Humber
• East Midlands
• West Midlands
• East of England
• London (Greater London)
• London (Prime Central)
• South East England
• South West England
• Wales
• other (please specify)

If you answered “other” please provide further details.

Question 8

What is the size of your portfolio in million pounds (£m)?

• under £1 million
• £1 million to £4 million
• £5 million to £24 million
• £25 million to £99 million
• £100 million to £249 million
• £250 million to £999 million
• £1,000 million +

Valuers, law firms, legal representatives

Question 9

Please confirm which parties to enfranchisement you usually advise and act for.

• mainly provide advice to leaseholders
• mainly provide advice to freeholders/intermediate landlords
• provide advice to both leaseholders and freeholders/intermediate landlords
• other (please specify)

If you answered “other” please provide further details.

1. Introduction

1. In England and Wales, residential property has almost always been owned on either a freehold or leasehold basis. Owning a property on a “freehold” basis means that the purchaser has ownership which lasts forever, and they have extensive control of the property. Purchasing a leasehold property, on the other hand, is different. The purchaser i.e. the leaseholder, acquires the right to live in the property on a time-limited basis, for example 99 years, and control over the property is often constrained through the terms set out in the lease.

2. As the length of a lease reduces over time, the assumption is that the property will revert to the landlord (described in this consultation paper as the “freeholder”) at the end of the lease. At some point in time, leaseholders must therefore extend their lease or buy the freehold to retain ownership of the property (processes described collectively in this consultation as “enfranchisement”). Leaseholders have existing statutory enfranchisement rights under the Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993.

3. The Leasehold and Freehold Reform Act 2024 (“LFRA 2024”) will, when it is brought fully into force, make several significant changes to the current statutory enfranchisement processes through which leaseholders can buy the freehold of their property or extend their lease. Some of the key changes are:

a. It will give leaseholders the statutory right to extend their lease by 990 years, on payment of a lump sum (a premium) (increasing from the current additional 90 years for flats and 50 years for houses);

b. It adds a new statutory right to buy out just the ground rent, without an accompanying lease extension, for long leases with at least 150 years remaining;

c. It will set the Standard Valuation Method for calculating how much the leaseholder must pay to buy the freehold, extend their lease or to buy out their ground rent liabilities;

d. As part of this Standard Valuation Method, some leaseholders’ costs will be reduced through:

• the removal of the requirement to pay marriage value, which is currently an additional cost for leases with 80 years or fewer remaining on the lease
• capping the total value of ground rent used in the valuation calculation if it exceeds 0.1% of the freehold value. This will reduce the cost where the lease has high and/or escalating ground rents which exceed that threshold.

e. The subject of this consultation: The Standard Valuation Method also contains new powers for the Secretary of State to prescribe the applicable deferment rate and capitalisation rate that are to be used in the calculation of the price paid for freehold acquisitions, lease extensions, and claims to buy out ground rent.^{[footnote 1]}

f. Many leaseholders will save on their enfranchisement process costs (e.g. for conveyancing), through a new requirement that each party should pay their own costs, subject to a small number of exceptions. These costs are often called “non-litigation” costs.

4. Several provisions in the LFRA 2024 have already come into force. However, the new enfranchisement valuation methodology introduced by the LFRA 2024 cannot be brought into force without the deferment and capitalisation rates being set by the government in secondary legislation. Once set, the Secretary of State will be required to review the rates every 10 years.^{[footnote 2]}

5. The benefit of prescribing the deferment and capitalisation rates (which are used to calculate the premium payable) is that leaseholders will no longer need to negotiate the rates to be adopted on a case-by-case basis. Currently, this negotiation process involves valuers which can add delay and costs for both leaseholders and freeholders.

6. Prescribing the rates will also address an inequality in bargaining power between leaseholders and freeholders, the latter of whom are often better resourced to pursue an advantageous result. Currently for some leaseholders, there may be limited choice but to accept a less-than-ideal outcome because of other factors, including time pressures or concerns that costs might rise further if the case were to proceed to a Tribunal for a determination of the premium payable. Prescribing rates will also increase legal certainty by removing the risk of leaseholders or freeholders finding that the approach to valuation changes unexpectedly as a result of a decision by a senior tribunal or court.

7. Overall, the prescription of rates, alongside the other valuation reforms, will help give leaseholders greater certainty over how much they will need to pay to buy the freehold, extend a lease, or buy out their ground rent liability, and help to avoid either leaseholders or freeholders needing to go to a tribunal to seek a determination where agreement cannot be reached.

1.1 Where do the rates fit into the Standard Valuation Method?

8. As part of the new Standard Valuation Method, the premium paid by the leaseholder for buying their freehold or extending their lease is determined over several steps set out in the LFRA 2024. The legislation requires certain assumptions to be made by the parties to the enfranchisement transaction, for instance, that any intermediate leases are merged with the superior interest and that marriage value is not payable. There are three primary steps (steps 1, 2, and 3) for determining components of the premium, which includes the “term value” (step 1) featuring the capitalisation rate and the “reversion value” (step 2), featuring the deferment rate. The deferment rate and capitalisation rate are used to turn future values that a freeholder would receive into today’s prices, which apply in practice with a discounting effect.^{[footnote 3]}

9. The calculation of the term value and reversion value are as described below:

a. Step 1: The term value is the value of the freeholder’s right to receive ground rent for the remaining term of the lease. The capitalisation rate is applied to the rent to find the present value (as a capital sum).

b. Step 2: The reversion value is the value of the freeholder’s right to vacant possession at the end of the lease. This is found by using the deferment rate to discount the value of the property over the unexpired term of the lease. The value to be discounted differs by the type of claim. It is:

• For freehold acquisitions:  the value of the vacant freehold (the freehold vacant possession value, “FHVP”) of a house or block of flats that would have otherwise reverted to the freeholder at the end of the lease.

• For lease extensions: the value of a 990-year lease granted at a peppercorn ground rent, deferred until the end of the term of the qualifying tenant’s lease.

10. The premium is then found by adding together the term value and reversion value (step 3), plus any additional adjustments including for other compensation.^{[footnote 4]}  For claims that exercise the new right to buy out the ground rent, only the term value is relevant. Below is a simplified illustration of the new valuation methodology under the LFRA 2024 that shows where the rates fit in:

11. Below is an example of the term value and reversion value for a 990-year lease extension. The flat concerned has a long leasehold value of £250,000, 100 years remaining on the lease, and a ground rent of £150 increasing by £25 after 20 years and every 20 years thereafter. We have used a deferment rate of 5% and a capitalisation rate of 6% for illustrative purposes. This produces a value of £2,675 for the term and £1,901 for the reversion value. This would be a total premium of £4,576.

Step 1: Term value, finding present value per year @ 6%

Period (Years)	Ground Rent (£/year)	Aggregated rent for 20 year periods (undiscounted)	Value of rent (discounted @6%) (rounded)
0 to 20	£150	£3,000	£1,720
21 to 40	£175	£3,500	£626
41 to 60	£200	£4,000	£223
61 to 80	£225	£4,500	£78
81 to 100	£250	£5,000	£27
Term value	-	-	£2,675 (rounded)

Step 2: Reversion

Value of a lease extended by 990 years	£250,000
Reversion value payable (£250,000 after 100 years @ 5%)	£1,901

Step 3 and total premium

Term	£2,675
Reversion	£1,901
Premium	£4,576

1.2 The government’s aims for setting rates

12. Once they are brought into force, some of the provisions in the LFRA 2024 will lead to significant savings for many leaseholders who exercise their statutory rights to buy their freehold, extend their lease, or buy out their ground rent liabilities. This is achieved through removing the requirement to pay marriage value, capping the ground rent in the valuation calculation at 0.1% of the FHVP, and requiring each party to pay their own costs, other than when a small number of exceptions apply.^{[footnote 5]}

13. Separately, prescribing the rates will make the enfranchisement process simpler and reduce each party’s professional costs for valuation.^{[footnote 6]} Prescribing the rates will enable leaseholders and freeholders to have a clearer idea of their costs at the outset. It will reduce the potential for dispute and provide certainty for leaseholders, freeholders and professionals as to what to expect from this part of the enfranchisement process.

14. The purpose of the capitalisation and deferment rates, as set out in the LFRA 2024, is to calculate the present value of future receipts and income streams stretching into the future. Therefore, whilst the new enfranchisement measures as a whole will make enfranchisement cheaper and easier, it is not intended to use prescribed rates in and of themselves, as a means of further reducing premiums for leaseholders, or to provide compensation to freeholders for the loss of income through other reforms to the valuation process. The government’s aim is to set rates that reasonably find the present value of the “reversion” and “term” elements of the premium. In doing so, the government aims to set rates in a way that provides simplicity, certainty and stability for those involved in enfranchisement claims. The government aims to set rates in a way that avoids the need for case-by-case professional valuation advice and significantly reduces the scope for disputes. The government intends to avoid fluctuations and short-term changes in rates, creating instability that could adversely impact either party. Through implementation of the reformed valuation regime under the LFRA 2024, the government aims to ensure sufficient compensation is paid by enfranchising leaseholders to freeholders to reflect their legitimate property interests.

15. The deferment rates for flats and houses have effectively been prescribed since the decision of the Lands Tribunal in “Sportelli”^{[footnote 7]}, although in a limited number of cases, sufficient evidence has justified departures from these rates.

16. The capitalisation rate adopted in an enfranchisement valuation currently depends on the facts of the case, and different valuers will have different views on the appropriate rate. Valuers look at market evidence about how investors generally are investing their money and the returns that they receive from those investments to arrive at a rate that is appropriate for the particular income stream that they are valuing.

17. A range of rates could be reasonably argued to be capable of finding the present value. It is within the context of this background that government must decide on appropriate rates.

18. The deferment and capitalisation rates set will be used for up to 10 years and will apply within the context of the new Standard Valuation Method. This, along with the fact that the leaseholder is not in the market and the appropriate rates to be applied would ordinarily differ to a greater extent than can be catered for by prescription, means, to a degree, these rates will reflect a hypothetical market in which enfranchisement is undertaken under the terms set out by the LFRA 2024.

19. The government’s intention is therefore to use this consultation to assist in determining what values would be appropriate.

1.3 Key considerations

20. There are several considerations which affect the options presented in this consultation document.

21. The LFRA 2024 does not permit the Secretary of State to prescribe different rates for different geographical regions.

22. The rates will apply only to relevant leases with an unexpired term exceeding five years.^{[footnote 8]}

23. The government has considered whether rates should differ for “types” of leaseholders or freeholders. The amended valuation scheme in the LFRA 2024 was never intended to apply differently according to the category of leaseholders or freeholders.^{[footnote 9]} To promote a fair leasehold system, the government believes that the same rates should apply to all leaseholders regardless of whether they are, for example, resident leaseholders or buy-to-let landlords, and regardless of the nature of their freeholder e.g. a private individual, a charity, a company or a group of enfranchised leaseholders. Seeking to apply the rates by “types” of leaseholders or freeholders would create a two-tier system from the leaseholder’s perspective. It would not promote the aims of the legislation if a leaseholder were to be disadvantaged simply because their freeholder happens to be a charity, or another type of organisation.

2. Options for the deferment rates

24. Currently, different deferment rates are used for flats and houses. These rates have remained fixed since a Lands Tribunal decision in 2007 known as Sportelli. The case involved several properties in Prime Central London (“PCL”) and the decision applied to leases with over 20 years remaining on the lease. This has resulted in different deferment rates being set at 4.75% for houses and 5% for flats. The Tribunal in Sportelli set a different deferment rate for flats than for houses because it reasoned that flats are subject to greater management complexities and risks, such as service charge disputes and communal repairs.

25. The Tribunal determined the rates following 11 days of hearing evidence and expert opinion. The Tribunal’s rates were the aggregate of three components:

a. The risk-free rate: the return on an investment with zero risk, proxied by the yield on government securities (gilts). The Tribunal took a five-year average of index linked gilts and adopted 2.25%.

b. Risk premium: the additional return (on top of the baseline from risk-free rate) that an investor would receive from a “riskier” investment, specific to property investment, with risks including volatility, illiquidity, obsolescence and depreciation. The Tribunal adopted the baseline of 4.5% for houses (and added 0.25% to this for flats).

c. Real house price growth rate: the expected long-term increase in residential property values after adjusting for inflation. The Tribunal considered factors that might affect growth in future and adopted 2%.

26. The deferment rates were then calculated as risk-free rate + risk premium − real growth rate, with an addition to the risk premium for flats:

Property type	Risk-free rate (%)	Risk premium (%)	Real growth rate (%)	Deferment rate (%)
Houses	2.25	4.5	-2.0	4.75
Flats	2.25	4.5 + 0.25	-2.0	5.00

27. The Tribunal’s intention was to establish a benchmark deferment rate to inform enfranchisement valuation, providing a constant, stable rate. It suggested that divergence from the rates on a case-by-case basis was only appropriate where evidence warranted it, mostly likely for properties outside of PCL.^{[footnote 10]} There have been subsequent Tribunal cases where sufficient evidence was provided to argue for a different rate. For example, where there was evidence of differences in regional price growth, or about the specific property’s risk of obsolescence.^{[footnote 11]} Adjustments have also been made to account for the possession held by a mid-term intermediate lease.^{[footnote 12]} The government is unclear how frequently such cases arise and seeks further evidence. It should be noted that where the Standard Valuation Method is compulsory, the LFRA 2024 will not allow any divergence from the rates that have been prescribed.^{[footnote 13]}

28. Currently, where a lease has an unexpired term of under 20 years, then the rates in Sportelli may not be used in the same way, or at all. Where the lease has between 10-20 years unexpired, the Upper Tribunal considered cases where it adjusted Sportelli depending on the remaining term. Terms between 5-10 years were not before the Tribunal and different approaches may be required e.g. net rental yields.^{[footnote 14]}

29. Where the unexpired term is under five years, Sportelli is not used. Instead, different adjustments are made using the net rental yield appropriate to the property, an end allowance to reflect the owner’s lack of control during the period of reversion, and the element of real growth.^{[footnote 15]} As noted above at paragraph 22, under the LFRA 2024, it will not be possible to prescribe rates for leases with unexpired terms of fewer than five years.

30. The Tribunal noted the circumstances when a full review of the deferment rates in Sportelli might be required, for instance if there was a clear trend of change showing in some of the components used in Sportelli.^{[footnote 16]} There has not yet been a successful challenge to the national application of Sportelli, although this has remained a possibility.^{[footnote 17]} Commentators continue to suggest that the components making up Sportelli have since changed.^{[footnote 18]} The Law Commission reported that consultees had a range of views about how the deferment rate could have changed, based on their assessment of the market, and their valuation approach. Suggestions for new rates ranged from 2.25% to 9.75% or higher.^{[footnote 19]}

Question 10

Have you come across situations where, in a successfully completed enfranchisement claim, there has been an adjustment to the rates in Sportelli?

• yes
• no
• don’t know

a. How many claims per year were adjusted for property specific obsolescence?

Please provide a number if known

What were the adjustments in those cases?

b. How many claims per year were adjusted for the reversionary interest of a mid-term intermediate lease?

Please provide a number if known

What were the adjustments in those cases?

c. Were adjustments made for any other reasons?

Please provide further details, including the number of cases per year and the value of the adjustments.

2.1 Options

31. The government has considered the following approaches:

1. Option 1: Continuing the rates set in Sportelli.
2. Option 2: Update Sportelli.
3. Option 3: Alternative approaches.

Option 1: Continuing the rates set in Sportelli

32. The government considers that there might be good reasons for maintaining the deferment rates for flats and houses at the rates that were determined in Sportelli; that is 4.75% for houses and 5% for flats. These rates are well understood, were produced following extensive investigation, evidence and a consensus view of several experts that has not been successfully challenged. Having been in place for a significant period, without successful challenge at a national level, they can reasonably be considered to be the prevailing market rates with which to calculate enfranchisement premiums.

33. Some responses to the Law Commission’s consultation recommended this approach.^{[footnote 20]} Some of the written evidence sent by stakeholders to Parliament about the Leasehold and Freehold Reform Bill (as it was) also suggested considering the use of the rates in Sportelli.^{[footnote 21]}

34. The government therefore believes the rates set in Sportelli provide a starting point and prescribing the deferment rates at these values would provide, for most enfranchisement cases, continuity and simplicity through the use of the prevailing rates.

35. As noted in paragraph 27, where the Standard Valuation Method applies, it will not permit any divergence from the prescribed rates. If the rates were set at the levels in Sportelli, there will be some cases affected where, currently, sufficient evidence could be provided to argue for a different rate.

Option 2: Update Sportelli

36. In Sportelli, the Tribunal noted that the deferment rate could be treated as stable over time unless a trend movement in at least one component of the formula could be identified.^{[footnote 22]}

37. Due to the passage of time, the government believes it is important that consideration is now given to reviewing whether different rates than those in Sportelli should be set, based on independent analysis of more recent market evidence.

38. The government therefore sought an independent actuarial estimation from the Government Actuary’s Department (“GAD”)^{[footnote 23]} in relation to the following two exercises:

a. To re-estimate each component of the Sportelli formula exactly as it had been in 2007 (GAD were constrained to update the data in the formula only “mechanistically”^{[footnote 24]} (Exercise 1).

b. To estimate each component of the formula with updated data and using its judgment, to reflect current economic conditions (Exercise 2).

39. In the first exercise, GAD found that it could not update all the components “mechanistically” to be consistent with Sportelli, and so, the approach in Exercise 1 introduced inconsistencies to the results. It produced a deferment rate for September 2025 of 1.61%. GAD did not recommend using this approach in isolation to set a new rate and proposed that further scope for judgment was required.

40. In the second exercise, GAD reconsidered some of the data and methodology used for the components of the Sportelli formula. It produced a deferment rate of 6.05% for houses and 6.3% for flats, as of September 2025. Different approaches also produced different rates of 5.05% and 5.85% for houses. GAD stated that these rates do not represent upper and lower boundaries, meaning that higher or lower rates may be possible. It is likely, however, that if the exercises were repeated at a future point, that they would produce different results depending on how the economic data affects the components; potentially higher or lower values in future.

41. For further specific detail on each approach GAD took, please see GAD’s report to the government shown in Annex A.

42. In presenting Option 2, we are asking consultees which approaches should be taken, if their preference is to update Sportelli. For the avoidance of doubt, Option 2 is not consulting specifically on the rates that GAD produced, given that these could change if the analysis is undertaken again in future.

Option 3: Alternative approaches

43. The government is aware that there could be many alternatives to determining the deferment rate, such as re-running Sportelli in different variations, or considering different factors. We discuss some of these below.

44. An alternative re-run of Sportelli could include setting a single combined deferment rate for houses and flats, on the basis this could add simplicity to the valuation regime. There are however likely to be continuing differences in management issues in flats compared with houses and that this would complicate seeking to identify a single deferment rate for both types of property. Flats are likely to still present increased risks, such as from service charge challenges, as flats are more likely than houses to have such charges. The implementation of the LFRA 2024 may affect this further, as it sets out measures to increase service charge transparency and remove barriers for leaseholders to challenge their landlord.^{[footnote 25]}

45. An alternative factor could be to consider some limited property-specific variations. As noted at paragraph 27, whilst case-specific negotiation to differ from a prescribed rate will not be permitted under the LFRA 2024, it may be possible to prescribe rates that consider, at a general level, property specific factors such as an increased risk of obsolescence. There is likely to be some technical difficulty in seeking to prescribe a rate at a national level for property-specific factors. If it were possible to prescribe such rates, their use in practice would likely require a valuer’s opinion to determine whether the rate applies to the property. It is very likely to require additional costs and to encourage disputes from freeholders. The potential reduction in reversion value from achieving the rate may be offset with the costs from delay and disputes.

46. An adjustment could be considered for the scenario discussed in paragraph 27, where there is possession held by a mid-term intermediate lease. It does not seem possible, however, to identically replicate the current practice. This is because the LFRA 2024 will treat intermediate leases as merged with the superior interest, so any adjustments would apply to the whole reversion value, rather than portions of it as happens currently. A technically complex approach may be needed with a range of adjustments over a range of years of possession. This is likely to require more valuer input, increased process costs, and likely prompt disputes. The government considers that this would be contrary to the aims and simplifying effects of the provisions treating intermediate leases as merged.^{[footnote 26]}

47. An alternative factor could be to consider lease length. As noted above at paragraphs 28 to 29, different approaches are taken where leases have an unexpired term of fewer than 20 years. An alternative could be to prescribe rates for shorter leases, down to five years unexpired (noting that the LFRA 2024 will not permit rates to be prescribed for leases at five years or fewer remaining). Such an approach could re-introduce some complexity into the amended valuation scheme, which had been made simpler by applying the Standard Valuation Method across all leases in excess of five years.

48. GAD noted that there could be different approaches per component of the rate, such as:

a. Risk free rate: using different spot yield data, or different averaging and smoothing periods.

b. Real growth rate: alternative data sources or assessing the bearing of wider trends (population growth, climate change).

c. Risk premium: use the Capital Asset Pricing Model (CAPM), which would use the equity market to estimate a component of the deferment rate. It would estimate the risk premium for freehold reversions using the risk premium on the stock of a company or companies that had substantial investments in freehold reversions.^{[footnote 27]} Alternatively, using the credit spread of UK residential property (the difference between an asset and a benchmark gilt of a similar maturity) as a proxy for the movement of the risk premium.

49. The government is aware that there could also be alternatives outside of the Sportelli approach. Some alternatives were discussed in Sportelli, although the Tribunal ultimately discounted them. These included:

a. Determination by reference to rack rental yields (a yield based on the annual rental value of the property).^{[footnote 28]} The Law Commission reported that some consultees favoured this approach. ^{[footnote 29]}

b. Evidence from analysis of market sales of long-term residential reversions. ^{[footnote 30]}

50. The Law Commission reported responses proposing tracking another rate in the market (such as a long-term interest rate equivalent to the term of the lease) and that the prescribed rate should be based on “long-term property and financial evidence”.^{[footnote 31]}

51. We are keen to understand consultees’ views as to whether there are any further appropriate approaches or factors that the government should consider in prescribing rates.

Option 1: Continuing the rates set in Sportelli (4.75% for leasehold houses and 5% for flats)

Question 11

What impacts (positive or negative) would Option 1 have?

	Significant positive	Moderate positive	Neutral	Moderate negative	Significant negative	Don’t know
Leaseholders	-	–	-	-	-	-
Freeholders / intermediate landlords	-	-	-	-	-	-
Other relevant parties to enfranchisement (e.g. professionals)	-	-	-	-	-	-

Please explain your reasoning.

Option 2: Update Sportelli 

Question 12

Under Option 2, which components of the Sportelli rate should be updated and how?

Please provide details.

Question 13

What would be your preferred rates for Option 2? Please set out your reasoning.

Preferred deferment rate houses.

Please explain your reasoning and any reasonable ranges around your preferred rate.

Preferred deferment rate flats.

Please explain your reasoning and any reasonable ranges around your preferred rate.

Question 14

What impacts (positive or negative) would Option 2 have?

	Significant positive	Moderate positive	Neutral	Moderate negative	Significant negative	Don’t know
Leaseholders	-	–	-	-	-	-
Freeholders / intermediate landlords	-	-	-	-	-	-
Other relevant parties to enfranchisement (e.g. professionals)	-	-	-	-	-	-

Please explain your reasoning.

Option 3: Alternative approaches

Question 15

Under the LFRA 2024, should there be an adjustment to the deferment rates for property specific factors such as an increased risk of obsolescence? 

• yes
• no
• don’t know

Please explain your reasoning.

If you answered “Yes” please explain how the adjustment should be implemented in practice.  

Question 16

Under the LFRA 2024, should there be an adjustment to the deferment rates where there is a mid-term intermediate lease with a reversionary interest? Under the LFRA 2024, intermediate leases would still be treated as merged with the superior interests, regardless of any adjustments to the deferment rate.

• yes
• no
• don’t know

Please explain your reasoning.

If you answered “Yes” please explain how the adjustment should be implemented in practice. 

Question 17

What further alternative approach or factors do you think should be considered when setting the deferment rates?

Please provide details.

Question 18

What would be your preferred rates for Option 3? Please set out your reasoning.

Preferred deferment rate houses.

Please explain your reasoning and any reasonable ranges around your preferred rate.

Preferred deferment rate flats.

Please explain your reasoning and any reasonable ranges around your preferred rate.

Question 19

What impacts (positive or negative) would Option 3 have?

	Significant positive	Moderate positive	Neutral	Moderate negative	Significant negative	Don’t know
Leaseholders	-	–	-	-	-	-
Freeholders / intermediate landlords	-	-	-	-	-	-
Other relevant parties to enfranchisement (e.g. professionals)	-	-	-	-	-	-

Please explain your reasoning.

Question 20

Considering the options, please rank the following in order of preference (1 being your most preferred option and 3 your least).

• Option 1: Continuing the rates set in Sportelli.
• Option 2: Update Sportelli.
• Option 3: Alternative approaches.

Or, if you have no preference, tick below:

• no preference

Please explain why you have ranked the options in this way.

3. Options for the capitalisation rates

52. Under current legislation for flats, when leaseholders extend a lease using the statutory route, they extinguish all future ground rent payments that are required under the current lease, in exchange for a lump sum payment. The rights presently differ between leasehold flats and houses, although under the LFRA 2024, the terms will be aligned. In a freehold acquisition, where leaseholders have not already extended their leases, they would buy out any ground rent due to the freeholder.

53. In future, for both flats and houses, having compensated the freeholder with a premium for extending a lease, or for buying out the ground rent, leaseholders will then only be required to pay a peppercorn rent, which in practice means a rent of zero financial value.

54. The capitalisation rate is intended to reflect the “quality” of the income stream from the recipient’s point of view and the rate adopted in an enfranchisement calculation may currently vary depending on the facts of the case. When considering the appropriate capitalisation rate to use, valuers look at market evidence about how investors are investing their money and the returns that they receive from those investments to arrive at a rate that is appropriate for the particular income stream that they are valuing.

55. In 2007, the Lands Tribunal set out the key factors it thought valuers should take into consideration when adopting a capitalisation rate.^{[footnote 32]}

These were:

a. the remaining length of the lease term

b. the security of recovery

c. the size of the ground rent (a larger ground rent being more attractive)

d. whether there was provision for review of the ground rent

e. if there were such provision, the nature of it

56. Despite this approach, the Law Commission noted that the rate adopted can also be influenced by the differing opinions of valuers, with disputes settled by negotiation in which the parties aim for the best outcome for their clients.^{[footnote 33]} It is further influenced by extraneous factors, such as the parties’ relative bargaining powers to pursue the most advantageous result, which can be to the detriment of leaseholders. These are factors that will be removed from the process as a result of the provisions in the LFRA 2024 which require rates to be prescribed in secondary legislation.

57. The government understands that historically, ground rents that are high and/or escalating may have attracted a lower capitalisation rate, whereas low and fixed ground rents may have attracted rates at the upper end of a range. The Law Commission noted that under previous custom and practice, this range typically fell between 5% and 8%, although it also noted consultation responses that suggested there could be wider points on a range at 3% and 10%.^{[footnote 34]}

58. The department has undertaken a limited research exercise into recorded Tribunal decisions mentioning capitalisation rates.^{[footnote 35]} Whilst it is noted that the majority of enfranchisement claims are negotiated outside of the Tribunal, such cases do record some agreements, and determinations about the rate. Overall, the analysis identified a range of rates adopted between 4.5% and 9.00%. A majority of the cases (88% in the case of the First-tier Tribunal) reported a capitalisation rate of between 6.00% and 7.00%, although cases differed as to the specific ground rent terms and review mechanisms. The mean and median of this dataset were around 6.5%. There were notable outliers for several cases where the rents might ordinarily be considered “more valuable”, but the Tribunal adopted a rate in excess of 8%. Further detail is given in the associated Impact Assessment for this consultation.

59. The government is seeking further evidence about the current rates used.

Question 21

Please provide details about the range, or specific values, of capitalisation rates that are presently used for the following lease terms on ground rent (A, B and C).

Where a capitalisation rate is associated with a particular approach to modelling the ground rent, please explain the valuation approach used when selecting that rate.

A. Rents with no increases

Most often used rate:

Lowest percentage on the range:

Highest percentage on the range:

Please provide any further details and examples:

B. Rents with fixed increases

Most often used rate:

Lowest percentage on the range:

Highest percentage on the range:

Please provide any further details or examples:

C. Rents that increase by other means e.g. inflation

Most often used rate:

Lowest percentage on the range:

Highest percentage on the range:

Please provide any further details or examples:

3.1 Impact from the 0.1% cap

60. The LFRA 2024 permits the Secretary of State to prescribe the “applicable capitalisation rate” for the formulae that are used to determine the term value.^{[footnote 36]} The formulae apply to different types of leases depending on whether and how the ground rent escalates over the lifetime of the lease. The formulae address ground rents with:

a. no increases

b. fixed increases

c. increases by other means, e.g. with inflation

61. Before turning to the specific options, it is important to consider how the impact of the 0.1% cap on ground rent may affect the value of enfranchisement ground rent income streams. In its Valuation Report, the Law Commission stated that if ground rents were capped at 0.1% of FHVP, then the need for, as well as the possible range of different rates reduce.^{[footnote 37]}

62. Under the Standard Valuation Method, with some exceptions, the ground rent used in the valuation calculation will be capped at 0.1% of the FHVP.^{[footnote 38]} The government agrees with the Law Commission that this may affect the range and number of rates. The cap will reduce the difference between the different ground rent income streams, given that most will not be able to breach the cap. It is noted, however, that the 0.1% cap will not apply to all rents that fall within the Standard Valuation Method, depending on the property value or whether the exceptions to the cap apply.^{[footnote 39]}

63. There will be other provisions and legislation which might affect some of the factors previously considered in the adoption of a capitalisation rate. These are discussed below.

64. Currently, in certain cases where there is an intermediate lease, different capitalisation rates may be used based upon the value of the intermediate lease.^{[footnote 40]} Provisions in the LFRA 2024 will in future treat intermediate leases as merged with the superior interest(s) upon an enfranchisement and so there will be no need for specific approaches to rates that reflect intermediate leases.^{[footnote 41]}

65. Since 27 December 2025, provisions in the Renters’ Rights Act 2025 mean that leaseholders are no longer subject to the “assured tenancy trap”, through which a freeholder could seek possession of a lease for relatively modest ground rent arrears.^{[footnote 42]} This may affect the risk of recovery of ground rents. The government has announced changes to the law on forfeiture which can be triggered for ground rent arrears).^{[footnote 43]} Once in force these could affect the risk of recovery.

66. Furthermore, on 27 January 2026, the government announced its intention to introduce a legislative cap on ground rent at £250 p.a., changing to a peppercorn after 40 years. The proposal is currently in a draft Bill and not yet before Parliament in a format where it could be enacted. Should such provisions be enacted by Parliament, we expect them to also affect the attractiveness, to freeholders and investors, of high or escalating ground rents, thereby altering the range and need for differing capitalisation rates that might be applied to such ground rents in enfranchisement premium valuation calculations.

67. When considering future changes to the legislative and valuation landscape, and factoring in both the 0.1% cap and the £250 cap, there may be some circumstances where only one cap needs be applied (for instance, if the £250 cap brings the rent below the threshold of 0.1% of the FHVP); and in other cases, there may be some circumstances where both caps are to apply (for example, for properties where the FHVP is below £250,000, the 0.1% cap would also apply). The Government wishes to consider further the future interaction between the two caps (i.e. 0.1% and £250) on capitalisation rates.

68. In summary, the government considers that the effect of many of these changes, individually, and collectively, would be to adjust the range of capitalisation rates.

69. The government is assuming that, with the LFRA 2024’s 0.1% cap in force (at least), the range of capitalisation rates could still lie within the current typical range of 5% to 8%^{[footnote 44]}, but we are seeking further evidence as part of this consultation.

Question 22

When the LFRA 2024’s 0.1% cap is implemented, how will this affect the range of current rates for the three rent review types listed below (A, B, and C)?

A. Rents with no increases

Please provide any further details:

B. Rents with fixed increases

Please provide any further details:

C. Rents that increase by other means e.g., inflation

Please provide any further details.

3.2 Options

70. In consulting on prescribing the appropriate capitalisation rate(s), the government has considered the following approaches:

a. Option 1: A single capitalisation rate.

b. Option 2: Three capitalisation rates, differing by rent review

c. Option 3: Alternative approaches.

Option 1:  A single capitalisation rate

71. Setting a single capitalisation rate that applied to all the three term formulae would provide the most simplicity for leaseholders and freeholders. It would leave no scope for confusion, disagreement or any external influence over what rate should apply. It would reflect that the 0.1% cap, and other provisions, reduce the value distinctions between different ground rent streams.

72. It is possible that a single rate might create a broad spectrum of winners and losers, given that only one rate is being set for all rent review types. This impact will depend on several factors including the value of the rate chosen, how it differs to current rates, and whether the 0.1% cap would apply to the ground rent. The impacts of the value chosen (in terms of the change in the term value), should be balanced against the benefits of setting one simple indisputable rate. Through this consultation, we are seeking to identify what point would strike a fair balance between freeholders and leaseholders.

Option 2: Three capitalisation rates, differing by rent review

73. The government has heard views expressed by freeholders indicating that they interpret the provisions of the LFRA 2024 as permitting a different rate to be prescribed for each rent review formula (as described above at paragraph 60).

74. The government is consulting on an option of prescribing a different capitalisation rate for each rent review type (three in total). The option could provide a level of simplicity for leaseholders and freeholders, because, compared to the current position, there is only one rate to choose from for the relevant type of rent review. It might create winners and losers from the change in the term value if the rate chosen for the particular type of ground rent review is different compared to current rates, even after taking account of the 0.1% cap.

75. Under this option, the process of determining, or even agreeing, the relevant rate between enfranchisement parties, might allow disputes to arise if the lease terms are unclear, or through error. In such cases, leaseholders could be pressured into agreeing to a potentially incorrect rate to avoid the costs and delay of seeking a determination by the Tribunal.

Option 3: Alternative approaches

76. There could be further approaches or factors to setting the rates. The Law Commission noted that some of the responses proposed adopting specific values on a range between 5% and 8%, with some other responses between 3% and 10%, or tracking some other rate in the market e.g. an appropriate gilt rate related to the length of the lease.^{[footnote 45]}

77. Whilst the 0.1% cap is assumed to reduce the difference between rent streams, some of the current factors considered in adopting the rate (see paragraph 55 above), could still have an influence on the capitalisation rates and alternative approaches could look at the extent to which these factors still have a relevance. There will also be cases where the 0.1% cap does not apply, either because of the property value, or because of the exceptions to the 0.1% cap (as discussed in paragraph 62), which could then have a bearing on the rates in those cases.

78. The government is interested in hearing what other factors consultees consider could be relevant in the approach to, and value of the prescribed rate(s).

3.3 Capitalisation rate options - question scenarios

79. As noted above at paragraphs 62 to 68, it is possible that the capitalisation rates and options may be affected by different ground rent caps being in force. We will therefore ask consultees questions in separate scenarios:

a. Scenario A: it is only the LFRA 2024’s 0.1% cap on ground rent in calculation that is in force.

b. Scenario B: both the 0.1% cap and the ground rent cap (£250 p.a. leading to a peppercorn in 40 years’ time) are in force.

80. The scenarios will help to identify any differences of approach to assist with developing the options further.

81. As discussed in paragraph 60, the LFRA 2024 has formulae for approaching different rent types, as detailed in LFRA 2024 schedule 4, part 7, paragraphs 36 to 38.^{[footnote 46]}In providing responses to the options, consultees are asked to consider the way in which the rent is capitalised under the specified formula for the relevant rent type.

Scenario A: it is only the LFRA 2024’s 0.1% cap on ground rent in calculation that is in force

Option 1: A single capitalisation rate.

Question 23

What would be your preferred rate for Option 1?  Please set out your reasoning.

Preferred single capitalisation rate:

Please explain your reasoning:

Question 24: What impacts (positive or negative) would Option 1 have?

	Significant positive	Moderate positive	Neutral	Moderate negative	Significant negative	Don’t know
Leaseholders	-	–	-	-	-	-
Freeholders / intermediate landlords	-	-	-	-	-	-
Other relevant parties to enfranchisement (e.g. professionals)	-	-	-	-	-	-

Please explain your reasoning:

Option 2: Three capitalisation rates differing by rent review type.

Question 25

For each of the rent review types given below (A, B, and C) what would be your preferred rate? Please set out your reasoning.

A. Rents with no increases

Preferred capitalisation rate:

Please explain your reasoning:

B. Rents with fixed increases.

Preferred capitalisation rate:

Please explain your reasoning:

C. Rents that increase by other means e.g. inflation

Preferred capitalisation rate:

Please explain your reasoning:

Question 26

What impacts (positive or negative) would Option 2 have?

	Significant positive	Moderate positive	Neutral	Moderate negative	Significant negative	Don’t know
Leaseholders	-	–	-	-	-	-
Freeholders / intermediate landlords	-	-	-	-	-	-
Other relevant parties to enfranchisement (e.g. professionals)	-	-	-	-	-	-

Please explain your reasoning:

Option 3: Alternative approaches

Question 27

Should specific capitalisation rates be set for leases excepted from the 0.1% cap?

• yes
• no
• don’t know

Please explain your reasoning and any rates that should apply:

Question 28

What further alternative approach or factors do you think should be considered when setting the capitalisation rates?

Question 29

Under the alternative approach you described, what are the capitalisation rates that the government should take forward?

If your approach would result in different rates in different circumstances, please explain which rates you consider most important and how other rates would vary.

Question 30

What impacts (positive or negative) would Option 3 have?

	Significant positive	Moderate positive	Neutral	Moderate negative	Significant negative	Don’t know
Leaseholders	-	–	-	-	-	-
Freeholders / intermediate landlords	-	-	-	-	-	-
Other relevant parties to enfranchisement (e.g. professionals)	-	-	-	-	-	-

Please explain your reasoning:

Question 31

Considering the options, please rank the following in order of preference (1 being your most preferred option and 3 your least):

	1	2	3
Option 1: A single capitalisation rate.
Option 2: Three capitalisation rates, differing by rent review.
Option 3: Alternative approaches.

Or, if you have no preference, tick below:

• no preference

Please explain why you have ranked the options in this way:

Scenario B: both the 0.1% cap and the ground rent cap (£250 p.a. leading to a peppercorn in 40 years’ time) are in force   

Question 32

If both ground rent caps were in force at the same time, would this change your previous answers about the capitalisation rates to be used?

• yes it will change the rates to be used
• no it will not change the rates to be used

Scenario B – if answer to Question 32 is “yes”

Question 33

What would be your revised preferred rate for Option 1: A single capitalisation rate?

Preferred capitalisation rate:

Please explain your reasoning:

Question 34

What would be your revised preferred rates for Option 2: Three capitalisation rates differing by rent review type (A, B and C)?

A. Rents with no increases.

Preferred capitalisation rate

Please explain your reasoning:

B. Rents with fixed increases.

Preferred capitalisation rate:

Please explain your reasoning:

C. Rents that increase by other means e.g. inflation.

Preferred capitalisation rate:

Please explain your reasoning:

Question 35: Option 3

a. What alternative approach or factors do you think should be considered when setting the capitalisation rates under Option 3?

b. Under the alternative approach you described, what are the capitalisation rates that the government should take forward? If your approach would result in different rates in different circumstances, please explain which rates you consider most important and how other rates would vary.

Question 36

Would your ranking preferences change? Please explain any answer given and, if you answer “yes” provide a new ranking.

• yes
• no
• don’t know

If you answered “yes” please provide your revised ranking:

	1	2	3
Option 1: A single capitalisation rate.
Option 2: Three capitalisation rates, differing by rent review.
Option 3: Alternative approaches.

Please explain your answer:

Scenario B – if answer to Question 32 is “no”

Question 37

You said that both the 0.1% cap and the ground rent cap (£250 p.a. leading to a peppercorn in 40 years’ time) being in force would not change your previous answers. Please explain why.

Please explain your reasoning.

4. Other information

Impact on protected characteristics

79. In addition to the more specific policy questions, we are keen to understand perceived impact on other areas. The Public Sector Equality Duty, set out in the Equality Act 2010, requires us to have due regard to the need to eliminate discrimination against, advance equality of opportunity for, and foster good relationship between, different groups defined by characteristics protected under the Act. We are seeking views on potential impacts on those groups.

Question 38

Speaking about your preferred option for the deferment rates (which you selected in Question 20), what impacts do you expect it to have on individuals who share protected characteristics, where those individuals are:

A. Leaseholders

B. Freeholders/landlords

C. Other relevant parties involved in enfranchisement

For each group below, please indicate whether you consider the impact to be positive, neutral or negative and provide your reasoning.

In the free text boxes, please do not provide any information about your own characteristics or that of another person e.g. a specific person’s age, their race or sex etc. 

A. Leaseholders

Protected characteristic	Positive	Neutral	Negative	Don’t know
Age	-	-	-	-
Disability	-	-	-	-
Sex	-	-	-	-
Gender reassignment	-	-	-	-
Marriage or civil partnership	-	-	-	-
Pregnancy and maternity	-	-	-	-
Race (colour, nationality, ethnic or national origins)	-	-	-	-
Religion or belief	-	-	-	-
Sexual orientation	-	-	-	-

Please explain your reasoning.

B. Freeholders/intermediate landlords

Protected characteristic	Positive	Neutral	Negative	Don’t know
Age	-	-	-	-
Disability	-	-	-	-
Sex	-	-	-	-
Gender reassignment	-	-	-	-
Marriage or civil partnership	-	-	-	-
Pregnancy and maternity	-	-	-	-
Race (colour, nationality, ethnic or national origins)	-	-	-	-
Religion or belief	-	-	-	-
Sexual orientation	-	-	-	-

Please explain your reasoning.

C. Other relevant parties involved in enfranchisement

Protected characteristic	Positive	Neutral	Negative	Don’t know
Age	-	-	-	-
Disability	-	-	-	-
Sex	-	-	-	-
Gender reassignment	-	-	-	-
Marriage or civil partnership	-	-	-	-
Pregnancy and maternity	-	-	-	-
Race (colour, nationality, ethnic or national origins)	-	-	-	-
Religion or belief	-	-	-	-
Sexual orientation	-	-	-	-

Please explain your reasoning.

Question 39

Speaking about your preferred option for the capitalisation rates only under Scenario A: 0.1% cap in force (answered in question 31), what impacts do you expect it to have on individuals who share protected characteristics, where those individuals are:

A. Leaseholders

B. Freeholders/landlords

C. Other relevant parties involved in enfranchisement

For each group below, please indicate whether you consider the impact to be positive, neutral or negative and provide your reasoning.

In the free text boxes, please do not provide any information about your own characteristics or that of another person e.g. a specific person’s age, their race or sex etc. 

A. Leaseholders

Protected characteristic	Positive	Neutral	Negative	Don’t know
Age	-	-	-	-
Disability	-	-	-	-
Sex	-	-	-	-
Gender reassignment	-	-	-	-
Marriage or civil partnership	-	-	-	-
Pregnancy and maternity	-	-	-	-
Race (colour, nationality, ethnic or national origins)	-	-	-	-
Religion or belief	-	-	-	-
Sexual orientation	-	-	-	-

Please explain your reasoning.

B. Freeholders/intermediate landlords

Protected characteristic	Positive	Neutral	Negative	Don’t know
Age	-	-	-	-
Disability	-	-	-	-
Sex	-	-	-	-
Gender reassignment	-	-	-	-
Marriage or civil partnership	-	-	-	-
Pregnancy and maternity	-	-	-	-
Race (colour, nationality, ethnic or national origins)	-	-	-	-
Religion or belief	-	-	-	-
Sexual orientation	-	-	-	-

Please explain your reasoning.

C. Other relevant parties involved in enfranchisement:

Protected characteristic	Positive	Neutral	Negative	Don’t know
Age	-	-	-	-
Disability	-	-	-	-
Sex	-	-	-	-
Gender reassignment	-	-	-	-
Marriage or civil partnership	-	-	-	-
Pregnancy and maternity	-	-	-	-
Race (colour, nationality, ethnic or national origins)	-	-	-	-
Religion or belief	-	-	-	-
Sexual orientation	-	-	-	-

Please explain your reasoning.

About this consultation

This consultation document and consultation process have been planned to adhere to the Consultation Principles issued by the Cabinet Office.

Representative groups are asked to give a summary of the people and organisations they represent, and where relevant who else they have consulted in reaching their conclusions when they respond.

Information provided in response to this consultation may be published or disclosed in accordance with the access to information regimes (these are primarily the Freedom of Information Act 2000 (FOIA), the Environmental Information Regulations 2004 and UK data protection legislation.  In certain circumstances this may therefore include personal data when required by law.

If you want the information that you provide to be treated as confidential, please be aware that, as a public authority, the department is bound by the information access regimes and may therefore be obliged to disclose all or some of the information you provide. In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on the department.

The Ministry of Housing, Communities and Local Government will at all times process your personal data in accordance with UK data protection legislation and in the majority of circumstances this will mean that your personal data will not be disclosed to third parties. A full privacy notice is included below.

Individual responses will not be acknowledged unless specifically requested.

Your opinions are valuable to us. Thank you for taking the time to read this document and respond.

Are you satisfied that this consultation has followed the Consultation Principles?  If not or you have any other observations about how we can improve the process please contact us via the complaints procedure.

Personal data

The following is to explain your rights and give you the information you are entitled to under UK data protection legislation.

Note that this section only refers to personal data (your name, contact details and any other information that relates to you or another identified or identifiable individual personally) not the content otherwise of your response to the consultation.

1. The identity of the data controller and contact details of our Data Protection Officer    

The Ministry of Housing, Communities and Local Government (MHCLG) is the data controller. The Data Protection Officer can be contacted at dataprotection@communities.gov.uk or by writing to the following address:

Data Protection Officer
Ministry of Housing, Communities and Local Government
Fry Building
2 Marsham Street
London
SW1P 4DF

2. Why we are collecting your personal data  

Your personal data is being collected as an essential part of the consultation process, so that we can contact you regarding your response and for statistical purposes. We may also use it to contact you about related matters.

We will collect your IP address if you complete a consultation online. We may use this to ensure that each person only completes a survey once. We will not use this data for any other purpose.

Sensitive types of personal data

Please do not share special category personal data or criminal offence data. By ‘special category personal data’, we mean information about living individuals, including:

• race
• ethnic origin
• political opinions
• religious or philosophical beliefs
• trade union membership
• genetics
• biometrics
• health (including disability-related information)
• sex life
• sexual orientation

By ‘criminal offence data’, we mean information relating to a living individual’s criminal convictions or offences or related security measures.

3. Our legal basis for processing your personal data

The collection of your personal data is lawful under article 6(1)(e) of the UK General Data Protection Regulation as it is necessary for the performance by MHCLG of a task in the public interest/in the exercise of official authority vested in the data controller.  Section 8(d) of the Data Protection Act 2018 states that this will include processing of personal data that is necessary for the exercise of a function of the Crown, a Minister of the Crown or a government department i.e. in this case a consultation.

Where necessary for the purposes of this consultation, our lawful basis for the processing of any special category personal data or ‘criminal offence’ data (terms explained under ‘Sensitive Types of Data’) which you submit in response to this consultation is as follows. The relevant lawful basis for the processing of special category personal data is Article 9(2)(g) UK GDPR (‘substantial public interest’), and Schedule 1 paragraph 6 of the Data Protection Act 2018 (‘statutory etc and government purposes’). The relevant lawful basis in relation to personal data relating to criminal convictions and offences data is likewise provided by Schedule 1 paragraph 6 of the Data Protection Act 2018.

4. With whom we will be sharing your personal data

MHCLG may appoint a ‘data processor’, acting on behalf of the department and under our instruction, to help analyse the responses to this consultation.  Where we do we will ensure that the processing of your personal data remains in strict accordance with the requirements of the data protection legislation.

5. For how long we will keep your personal data, or criteria used to determine the retention period.

We will retain your personal data for no longer than 2 years, or at the point at which the consultation responses have been anonymised, whichever is sooner. In some circumstances, we may retain data for longer periods where required to comply with legal, regulatory or contractual obligations, or for the establishment, exercise or defence of legal claims

6. Your rights, e.g. access, rectification, restriction, objection

The data we are collecting is your personal data, and you have considerable say over what happens to it. You have the right:

a. to see what data we have about you

b. to ask us to stop using your data, but keep it on record

c. to ask to have your data corrected if it is incorrect or incomplete

d. to object to our use of your personal data in certain circumstances

e. to lodge a complaint with the independent Information Commissioner (ICO) if you think we are not handling your data fairly or in accordance with the law.  You can contact the ICO at https://ico.org.uk/, or telephone 0303 123 1113.

Please contact us at the following address if you wish to exercise the rights listed above, except the right to lodge a complaint with the ICO: dataprotection@communities.gov.uk or:

Knowledge and Information Access Team
Ministry of Housing, Communities and Local Government
Fry Building
2 Marsham Street
London
SW1P 4DF

7. Your personal data will not be sent overseas.

8. Your personal data will not be used for any automated decision making.

9. Your personal data will be stored in a secure government IT system.

We use a third-party system, Citizen Space, to collect consultation responses. In the first instance your personal data will be stored on their secure UK-based server. Your personal data will be transferred to our secure government IT system as soon as possible, and it will be stored there for the retention period before it is deleted.

Footnotes

1. See paragraphs 27(8), 28(7) and 39(1) of schedule 4 to the LFRA 2024 under which the Secretary of State may prescribe the “applicable” deferment and capitalisation rates to be used in enfranchisement calculations. ↩

2. The LFRA 2024 does not set any requirements as to the conduct of such reviews. See LFRA 2024 schedule 4, paragraphs 27(10), 28(9), and 39(3). ↩

3. It is necessary to understand that £1 today is worth more than £1 in the future, because it can be invested and earn a return. In enfranchisement valuation, a lower discount rate results in a higher premium and a higher rate has the opposite effect. ↩

4. “Other compensation” under the LFRA 2024 is addressed in schedule 5 and could, for instance, include the devaluation of other property held by the freeholder affected by the claim. ↩

5. Exceptions permit the freeholder to recover costs only in limited and defined cases, including failed claims and low-value successful claims. For failed claims see: 1967 Act new section 19B (houses), and 1993 Act new sections 89B (failed lease extensions) and 89E (failed collective enfranchisements). For successful claims where the price payable is below a prescribed amount, see: 1967 Act new section 19C (houses), and 1993 Act new sections 89C (low‑value lease extensions) and 89F (low‑value collective enfranchisements). All of these provisions are inserted by the LFRA 2024. These measures will be the subject of further consultation and secondary legislation ahead of commencement. ↩

6. Leasehold and Freehold Reform Bill Impact Assessment IA No: DLUHC-5311, 31 October 2023, para 9 page 102, para 52 page 115. An Addendum to the Impact Assessment was published 14 April 2025. ↩

7. Earl Cadogan v Sportelli [2007] 1 EGLR 153. ↩

8. Due to the provisions in the LFRA 2024, schedule 4 paragraph 6. ↩

9. This is a point recently upheld by the Divisional Court in a judgment on judicial review claims in respect of some of the enfranchisement measures in the LFRA 2024. See ARC Time Freehold Income Authorised Fund & Ors, R (on the application of) v The Secretary of State for Housing, Communities and Local Government [2025] EWHC 2751 (Admin). ↩

10. As confirmed by the Court of Appeal judgment in Sportelli [2008] 1 WLR 2142, Carnwath LJ at para 102, the Tribunal envisaged evidence being provided for areas outside of PCL. ↩

11. In Zuckerman v Calthorpe Estates Trustees [2009] UKUT 235 (LC) the deferment rate was adjusted by 1% on several factors. This included an adjustment of 0.25% for the greater risk of obsolescence of the property, compared to properties in PCL. It included a 0.5% increase for lower regional growth in the West Midlands. It also included an increase of 0.25% for the risk management factor for flats, but this has not always been considered appropriate in subsequent cases. Obsolescence, in the context of leasehold enfranchisement valuation, refers to the risk that a building or part of it will, over time, become economically outdated (whether due to physical deterioration, functional inadequacy, technological change, or a combination of these factors) such that the cost of repair, renewal, or modernisation would be disproportionate to the value such works would create. Regional variation is not permitted under the Secretary of State’s powers. ↩

12. For example, in the case of Voyvoda v Grosvenor West End Properties [2013] UKUT 0334 (LC); [2013] 3 E.G.L.R. 55, an adjustment of 0.5% was made for the c.40 year possession held by the intermediate landlord after the expiry of the underlease’s original term. The reversion value for a further superior interest possession was valued using Sportelli. Under the LFRA 2024, intermediate leases are treated as merged with the superior interest, and so there is only a single possession valued, rather than “steps” as in Voyvoda. See LFRA 2024, schedule 4 paragraph 17(2). ↩

13. LFRA 2024, schedule 4, paragraphs 27–39. The Law Commission also noted consultation responses describing this potential effect, see Leasehold home ownership: buying your freehold or extending your lease – Report on Options to Reduce the Price Payable (Law Com No 387, 2020), para 6.73(4). ↩

14. Anthony Radevsky and Damian Greenish, Hague on Leasehold Enfranchisement (7th edn, Sweet & Maxwell 2020), ch 9 para 47. ↩

15. Law Com No 387, para 2.61;  Radevsky & Greenish, Hague, ch 9, para 48. ↩

16. See Sportelli, para 122. ↩

17. For example, see Llangewydd Court Ground Rent Estate v Ralph UKUT 0251 (LC) ↩

18. For example, Law Com No 387, para 6.80. ↩

19. Law Com No 387, para 2.70. ↩

20. Law Com No 387, para 6.73(2). ↩

21. Written evidence submitted by Homehold Services Limited to the Leasehold and Freehold Reform Bill Public Bill Committee (LFRB04); Written evidence submitted by Jones Lang LaSalle (JLL) to the Leasehold and Freehold Reform Bill Public Bill Committee (LFRB35). ↩

22. Sportelli, para 122. ↩

23. GAD is a UK non-ministerial department providing expert actuarial analysis, financial modelling, and advice to the public sector. ↩

24. Meaning the updating of the Sportelli formula with today’s numbers, without changing how the formula was originally designed or judged to work. ↩

25. See sections 53-58 and 62-63 of the LFRA 2024. ↩

26. See LFRA 2024, schedule 4, paragraph 17(2). Under the reforms it will be assumed that any intermediate leasehold interest is merged with the superior interest. In effect, it is assumed that the leaseholders only have one landlord to compensate. The new approach will reduce process costs for leaseholders, as the process is simplified. The aims of the provisions include moving from a scheme where the leaseholder compensates each and every landlord for what the landlords are losing (which is more complex and costly), to a scheme where the enfranchising leaseholder pays for what they are acquiring. For further details, see LFRA Impact Assessment (IA No: DLUHC-5311), paragraphs 16 and 80-84. ↩

27. The Tribunal in Sportelli rejected CAPM, because equities and freehold reversions are characteristically different, such as in liquidity. GAD noted that CAPM-based assumptions looked ahead for a shorter period than its chosen approach. ↩

28. The Tribunal rejected rack rental yields because the approach was short-term in outlook, did not consider certain elements the Tribunal thought might be important to the deferment rate (e.g. terms of control and opportunity to deal), and, at the time, appeared to operate in the opposite direction to what a long term deferment should do with market fluctuations. See Sportelli, paras 60-61. ↩

29. Law Com No 387, para 4.15. ↩

30. The Tribunal rejected the use of evidence from market sales for several reasons: a difference between real-world market and the statutory “no-Act world”; the circular influence of Tribunal decisions; and the inclusion of factors in the market price that are excluded (“hope value”). See Sportelli, paras 63-67. ↩

31. Law Com No 387, para 6.84. ↩

32. Nicholson and others v Goff [2007] 1 EGLR 83 ↩

33. Law Com No 387, paras 6.46-6.50. ↩

34. Law Com No 387, paras 2.70, 6.63 and 6.70(1). ↩

35. The website for the First‑tier Tribunal had decisions available for the period from December 2018 to the date of access (September 2025) for residential property decisions regarding leasehold enfranchisement and extension: Residential property tribunal decisions – GOV.UK. The website for the Leasehold Valuation Tribunal had decisions available for the period 2012 to the date of access (September 2025): Decisions – Leasehold Valuation Tribunal. ↩

36. See LFRA 2024, schedule 4, paragraphs 35-39. ↩

37. Law Com No 387, footnote 141, page 137. ↩

38. See LFRA 2024, schedule 4, part 3, paragraph 5. ↩

39. There is an exception to the 0.1% cap for leases granted with no premium, or where the premium was lower, and the rent was higher, than each would otherwise have been, and the reduction in the value of the premium was broadly equivalent to, or greater than, the capitalised value of the extra rent. See LFRA 2024, schedule 4, paragraph 26(9). ↩

40. See Law Com No 387, para 13.125. ↩

41. See LFRA 2024, schedule 4, paragraph 17(2). ↩

42. Section 31 of the Renters’ Rights Act 2025 will exclude long leases from being considered assured tenancies under the Housing Act 1988, thereby removing the ability of landlords to use the Ground 8 repossession route where ground rent arrears exceeded £250 nationally and £1000 in London. ↩

43. The government has announced its intention to abolish the right to forfeit a long residential lease for breach of covenant. In its place, the government will introduce a statutory lease  enforcement scheme. This modern framework will ensure that breaches can still be addressed, but in a way that is fairer and more proportionate. ↩

44. Law Com No 387, paras 2.70, 6.63; Leasehold and Freehold Reform Bill IA (2023), Annex 10, para 253. ↩

45. Law Com No 387, para 6.70. Other responses included differing rates depending on the type of rent review and considering regional rates, the latter of which are not possible under the Secretary of State’s powers. ↩

46.   See: https://www.legislation.gov.uk/ukpga/2024/22/schedule/4/part/7/enacted. ↩