Leasehold Risk: What to Check Before You Offer

When a lease is extended or a freehold bought out, the premium the leaseholder pays is calculated under the Leasehold Reform, Housing and Urban Development Act 1993. Where the unexpired term is short, that premium includes a share of "marriage value" — the uplift in the property's value created by merging the leasehold and freehold interests. Schedule 13 of the 1993 Act splits that uplift equally, so the leaseholder pays the freeholder half of the value the extension creates.

The Leasehold and Freehold Reform Act 2024 legislates to abolish marriage value. It received Royal Assent on 24 May 2024. It is not, however, self-executing: the valuation provisions require the Secretary of State to set capitalisation and deferment rates by secondary legislation first, and as at August 2026 they have not been brought into force. Parts of the Act have commenced — the removal of the two-year ownership qualifying period on 31 January 2025, and the right-to-manage changes on 3 March 2025 — but the valuation reforms have not.

The timetable is genuinely open. The government consulted on the enfranchisement valuation rates between 15 July and 23 September 2026, and has said the enfranchisement provisions cannot be commenced until a number of drafting flaws are corrected by primary legislation, which is expected to come through the Commonhold and Leasehold Reform Bill. Separately, a group of freeholders challenged the reforms by judicial review; the claim was dismissed by the High Court in October 2025, but permission to appeal was granted on all grounds in April 2026 and the appeal has not yet been heard. Treat the reform as pending and contested, not imminent.

The practical consequence is simple and unglamorous. If you buy a flat with a short lease today on the assumption that the extension will soon become cheaper, you are betting on a commencement date nobody has published. Price the extension on the law as it stands, and treat any future saving as upside rather than as part of your underwriting.

• Get a formal valuation from a surveyor who specialises in enfranchisement before you offer, not after.
• Deduct the extension premium plus both sides' professional costs from what you are prepared to pay.
• Ask whether the seller has already served a Section 42 notice — an assignable notice can be worth real money, because it fixes the valuation date.
• Treat marketing that prices a short lease as though the reform were already in force as a reason for more diligence, not less.

Marriage value is treated as nil only where the unexpired term exceeds 80 years at the relevant date, which for a flat lease extension is the date the leaseholder's Section 42 notice is given to the landlord. Read that wording carefully, because it is stricter than most people repeat it: at exactly 80 years the term does not exceed 80 years, so marriage value is payable. There is no taper. It is a cliff, and crossing it can add a five- or six-figure sum to the premium on a central London flat.

This is why the folk advice to "leave it until the lease is at 82 years, then extend" is dangerous. The valuation date is the date the notice is served, not the date you started thinking about it. Between deciding to extend and actually serving a valid notice you have to instruct a solicitor, commission a valuation, confirm the competent landlord and — very often — trace an absent or unresponsive freeholder. Two years of buffer disappears quickly, and if the notice is served late or served defectively and has to be re-served, you land on the wrong side of the cliff. Anyone currently sitting between 80 and roughly 83 years who waits for the reform to commence is very likely to serve their notice on the wrong side of it.

For a buyer, the corollary is about the lease you are acquiring rather than the one you already own. A lease in the low 80s is not a bargain waiting to happen; it is a deadline you are inheriting. Either extend early with a comfortable margin, or price the flat as though marriage value were already payable.

• Work out the unexpired term as at your likely completion date, not as at the date of the brochure.
• Anything under roughly 90 years should trigger a costed extension plan before you exchange.
• Anything under 85 years should be treated as urgent, because notice preparation alone can take months.
• An absent freeholder means a court application to dispense with service — budget time as well as money.

The Leasehold Reform (Ground Rent) Act 2022 restricted ground rent to a peppercorn — effectively nil — on most new long residential leases granted in England and Wales from 30 June 2022, with retirement properties following on 1 April 2023. It did not touch leases already in existence. A flat granted a 999-year lease in 2015 with a rent doubling every ten years still has that clause today.

The problem with an escalating ground rent is not usually the payment itself in year one. It is compounding, and it is what mortgage lenders do about it. The government's own January 2026 policy statement on ground rents records that the point at which a ground rent exceeds either 0.1 per cent of property value or £250 a year is a common standard at which lenders have traditionally started imposing additional checks. Lender practice also commonly resists rents that double more frequently than every twenty years, preferring index-linked reviews. These are conventions rather than a single published rule, and they vary by lender — but a clause that makes the flat difficult to mortgage shrinks your future buyer pool to cash purchasers, which is a resale problem regardless of how you funded the purchase yourself.

Not every review clause is a red flag. A rent linked to the Retail Prices Index at ten- or twenty-year intervals behaves very differently from one that doubles on the same cycle: an index-linked rent tracks inflation, while a doubling rent compounds at a fixed rate that can outrun it badly over a long lease. Read the clause and project it to the end of the term before deciding which you are looking at.

Existing leases may not stay untouched indefinitely. The draft Commonhold and Leasehold Reform Bill published in January 2026 proposes capping ground rent in existing long residential leases at £250 a year, converting to a peppercorn after a transition period — forty years as drafted, though the select committee scrutinising the Bill recommended twenty in May 2026. It is a draft Bill, not law, and commencement would be years away even once enacted. Useful context for a long hold; not something to underwrite on.

• Ask for the ground-rent clause itself, not the current figure. The current figure tells you nothing about year forty.
• Project the rent to the end of the lease. A rent doubling every ten years on a 125-year lease becomes an absurd number by the end.
• Check whether the rent can exceed the thresholds that turn a long lease into an assured tenancy, with the possession consequences that follow.
• Ask whether the freeholder has offered a deed of variation to convert the clause, and on what terms.
• If you need a mortgage, get the clause in front of a broker before you exchange, not at valuation stage.

Section 20 of the Landlord and Tenant Act 1985 requires a landlord to consult leaseholders before carrying out qualifying works where any one leaseholder would be charged more than £250, or before entering a qualifying long-term agreement costing any one leaseholder more than £100 a year. If the landlord does not consult properly, recovery is capped at those figures unless a tribunal grants dispensation.

Those thresholds are set by the Service Charges (Consultation Requirements) (England) Regulations 2003 and have not been uprated since, so almost any meaningful works programme in a London block triggers consultation. The government's 2025 consultation on leaseholder protections accepted that a framework unchanged for over twenty years is no longer fit for purpose, but no new figures have been made law. The consultation itself is a two- or three-stage process spread over months. That timeline is the buyer's opportunity: a Section 20 notice of intention issued before you exchange is discoverable, and a works programme being scoped but not yet noticed is discoverable too — if you ask the right question.

The liability follows the flat, not the seller. Once you complete, you own the leaseholder's share of whatever the building is about to spend on its roof, its lifts, its cladding remediation or its external redecoration. A seller who has just received a Section 20 notice has every incentive to say nothing, and no obligation to volunteer it beyond the standard pre-contract enquiries.

• Request the last three years of certified service-charge accounts, not a summary and not a single year.
• Compare the three years to each other. A charge that jumped 40 per cent in one year has a reason, and you want to know it.
• Ask specifically whether any Section 20 notice has been served in the last twenty-four months, and whether any is contemplated.
• Ask for the building's reserve-fund balance and the most recent surveyor's condition report or asset-management plan.
• Ask what the reserve fund is expected to cover, and what it is not. A healthy-looking balance against a £2m roof programme is not healthy.
• For buildings above 11 metres, ask about building-safety remediation status and who is paying for it.

One year of service-charge accounts tells you what the building spent. Three years tell you how the building is managed, which is the thing that actually determines your costs over a ten-year hold.

Across three years you can see whether the budget is being set realistically or optimistically, whether there are repeated end-of-year balancing charges, whether the reserve fund is genuinely being built or quietly being spent on routine repairs, and whether arrears among other leaseholders are rising. Arrears matter more than most buyers realise: in most blocks the shortfall from non-paying leaseholders is ultimately redistributed across everyone else.

You are also looking for the gap between the demanded charge and the actual expenditure. A building that consistently demands less than it spends is deferring a reckoning, and the reckoning tends to arrive as a supplementary demand or a special levy — often shortly after a sale completes.

• Certified accounts for three consecutive years, plus the current year's budget.
• The reserve-fund balance at each year end, and the movements in and out.
• Total arrears and the number of units in arrears.
• Any actual or threatened tribunal proceedings about the service charge.
• The managing agent's fee basis, and whether it changed during the period.
• The building's insurance premium history, which is where cladding and claims history show up first.

Service charges in London new-build are usually quoted per square foot per year, which makes them comparable across buildings of different sizes. The table below is computed directly from the development catalogue on this site each time the page is built, so it reflects what developers are actually publishing rather than a figure someone typed once and forgot.

Read it as context, not as a verdict. A high service charge is not automatically bad: a building with a concierge desk staffed around the clock, a pool, a gym and a residents lounge costs more to run than a building with a locked front door and a cleaner, and the amenity is part of what you are buying and part of what a tenant pays for. What matters is whether the charge is high relative to comparable buildings in the same district, and whether the extra buys something you or your tenant actually value.

Methodology: derived from 128 of 362 developments in our catalogue that publish a per-square-foot annual service charge; 30 further developments publish a service charge in a format we cannot make comparable (an absolute annual sum, a per-unit figure, or "on request") and are excluded rather than estimated, and 204 publish no figure at all. Quoted ranges are taken at their midpoint, and where a development quotes separate figures for houses and apartments or for different blocks, those figures are averaged so each development contributes one data point. Only districts with at least 3 developments are shown. Extracted August 2026.

Median across every included development, all districts: £6.17 per square foot per year.

Sample sizes are small — three to six developments in most districts — so treat the median as a rough anchor rather than a market rate. These are also developer-quoted figures, typically for the first year. First-year estimates in new-build have a well-documented tendency to be optimistic, and the figure that matters to you is the one in year three.

These are the questions we ask before advising a client to offer. Put them in writing, and keep the reply — a written answer that later proves wrong is a different conversation from a verbal one that was never recorded.

1. 1.

   What is the certified service charge per square foot for each of the last three years, and what is the current year's budget?

   Three years shows the trend and the quality of budgeting. One year shows nothing.

2. 2.

   What is the reserve-fund balance, and against what planned works is it earmarked?

   A balance is only reassuring in relation to a costed programme of works.

3. 3.

   Has any Section 20 notice been served in the last twenty-four months, and is any consultation currently contemplated?

   The liability transfers to you on completion. This is the single highest-value question on the list.

4. 4.

   What is the most recent condition survey or asset-management plan, and when is the next major works cycle due?

   Roofs, lifts, windows and external redecoration run on predictable cycles. Ask where the building sits in each.

5. 5.

   What are the total service-charge arrears, and across how many units?

   Shortfalls from non-paying leaseholders are generally spread across those who do pay.

6. 6.

   What is the current buildings-insurance premium, how has it moved over three years, and are there any outstanding claims?

   Insurance is where fire-safety and water-ingress problems show up before anyone writes them down.

7. 7.

   What is the ground rent, and what is the exact wording of the review clause?

   Ask for the clause, not the number. The number is the least informative part.

8. 8.

   Is there any building-safety remediation outstanding, and who is funding it?

   For buildings above 11 metres this determines both cost and mortgageability.

9. 9.

   Who is the freeholder, is there a residents' management company or right-to-manage company, and how is the managing agent appointed?

   Leaseholder control over the agent is the strongest single predictor of cost discipline.

10. 10.

    What are the letting restrictions in the lease — short lets, subletting consent, licence fees?

    A restriction you did not read can remove the rental strategy you bought the flat for.

If the managing agent will not answer in writing, that is an answer. Buildings that are well run are generally happy to demonstrate it.

Statutory positions on this page are stated as at August 2026 and link to primary sources. Commencement of the Leasehold and Freehold Reform Act 2024 is ongoing, so verify the position at the time you act.

• Leasehold Reform, Housing and Urban Development Act 1993 — legislation.gov.uk
• Leasehold and Freehold Reform Act 2024 — legislation.gov.uk
• Leasehold Reform (Ground Rent) Act 2022 — legislation.gov.uk
• Landlord and Tenant Act 1985, section 20 — legislation.gov.uk
• Service Charges (Consultation Requirements) (England) Regulations 2003 — legislation.gov.uk
• Leasehold enfranchisement valuation rates — consultation, GOV.UK (July 2026)
• Draft Policy Statement on Ground Rents — MHCLG (January 2026)
• Leasehold reform in England and Wales: what's happening and when — House of Commons Library
• LEASE — the Leasehold Advisory Service
• First-tier Tribunal (Property Chamber — Residential Property) — GOV.UK