Lease Extension Premium Disputes: How to Prepare Your Tribunal Bundle

Last updated: March 2026

Quick Answer

When a leaseholder and freeholder cannot agree on the premium for a statutory lease extension, either party can apply to the First-tier Tribunal (Property Chamber) under section 48 of the Leasehold Reform, Housing and Urban Development Act 1993 for a determination of the price. Your tribunal bundle should include the lease, the section 42 notice and section 45 counter-notice, valuation evidence from your surveyor, comparable sales data, and a clear statement of case. Valuation disputes typically turn on the capitalisation rate, deferment rate, relativity, and — for leases with fewer than 80 years unexpired — marriage value.

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Why Lease Extension Premiums Are Disputed

Extending a lease is rarely controversial in principle. Most freeholders accept that the leaseholder has a statutory right to a new lease, and most leaseholders understand they must pay a premium for it. The disagreement is almost always about the price.

The premium for a statutory lease extension is calculated using a formula set out in Schedule 13 to the Leasehold Reform, Housing and Urban Development Act 1993 (commonly referred to as "the 1993 Act"). The formula involves several components, each of which requires assumptions about value, yield rates, and market conditions. Reasonable surveyors can — and regularly do — reach significantly different figures.

A leaseholder might receive a counter-notice demanding a premium of £45,000, whilst their own surveyor values the premium at £18,000. Differences of this magnitude are not unusual, particularly for flats with shorter leases where marriage value comes into play.

When negotiation fails, the tribunal provides an independent determination. The application process is straightforward, the costs are relatively modest, and the tribunal has extensive experience in resolving these disputes.

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The Legal Framework

The Statutory Right to a Lease Extension

Under Chapter 2 of Part 1 of the 1993 Act, a qualifying tenant has the right to a new lease of their flat for an additional 90 years beyond the unexpired term, at a peppercorn rent (meaning no ground rent), in exchange for a premium.

Qualifying Conditions

The Section 42 Notice and Section 45 Counter-Notice

The process begins when the leaseholder serves a section 42 notice on the freeholder, proposing a premium and the terms of the new lease. The freeholder then has two months to serve a section 45 counter-notice, which must either admit the claim and propose an alternative premium, or deny the right to a new lease on specified grounds.

If the parties cannot agree on the premium through negotiation, either party can apply to the tribunal under section 48 for a determination.

The Premium Calculation: Schedule 13

The premium comprises up to three elements:

1. Diminution in the value of the landlord's interest — the difference between the value of the freeholder's interest with the existing lease and the value with the new 90-year extension at a peppercorn rent
2. The landlord's share of marriage value — applicable only where the unexpired lease term is less than 80 years (see below)
3. Compensation for other losses — for example, development value lost as a result of the extension

Each element involves valuation assumptions that can produce very different outcomes depending on the approach taken.

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Key Valuation Concepts

Understanding the valuation methodology is essential if you are preparing for a tribunal hearing on premium. You do not need to be a surveyor, but you do need to understand what your expert is saying — and what the other side's expert is likely to argue.

Capitalisation Rate

The capitalisation rate is used to calculate the present value of the freeholder's income stream (the ground rent) over the remaining lease term. A higher capitalisation rate produces a lower present value, which reduces the premium. Rates typically range from 5% to 7%, though the appropriate rate depends on the specific circumstances of the lease.

Deferment Rate

The deferment rate is used to calculate the present value of the freeholder's reversion — the right to receive the property back at the end of the lease. Following the landmark decisions in Sportelli [2007] 1 EGLR 153, the standard deferment rate is:

• 5.0% for flats
• 4.75% for houses

These rates are widely applied but can be departed from in exceptional circumstances, and your surveyor should address whether the standard rate is appropriate for your property.

Relativity

Relativity is the ratio of the value of a flat with its existing lease to the value of the same flat with a hypothetical long lease (typically 999 years or the freehold). For example, if a flat with 60 years remaining is worth 75% of its value with a long lease, the relativity is 75%.

Relativity decreases as the lease gets shorter. A flat with 90 years remaining might have a relativity of 95%, whilst the same flat with 50 years might be at 70%. The choice of relativity graph or data set can significantly affect the premium.

Marriage Value

Marriage value is the increase in the combined value of the freeholder's and leaseholder's interests that results from the grant of the new lease. Under the 1993 Act, the freeholder is entitled to 50% of the marriage value.

Critically, marriage value is only payable where the unexpired lease term is less than 80 years. This is why the 80-year mark is such a significant threshold — a leaseholder extending at 81 years pays no marriage value, whilst one extending at 79 years does. The difference in premium can be substantial.

Note: The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024 and includes provisions to abolish marriage value entirely. However, as at March 2026, the relevant sections have not yet been brought into force. Until they are commenced, marriage value remains payable for leases under 80 years.

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Preparing Your Tribunal Bundle

Premium disputes at the tribunal are valuation exercises. The quality of your expert evidence — and the clarity with which it is presented — will largely determine the outcome.

Essential Documents

Presenting Valuation Evidence Effectively

The tribunal will receive two expert reports, each setting out a different premium. Your task is to make your surveyor's methodology and conclusions as transparent as possible:

• Show your working. The tribunal wants to see the valuation calculation step by step — capitalisation rate, deferment rate, existing lease value, extended lease value, marriage value, and the resulting premium
• Justify your assumptions. Every key assumption (capitalisation rate, deferment rate, relativity) should be supported by reasoning and, where possible, comparable transaction data
• Address the other side's report. Identify where you agree and disagree with the respondent's surveyor, and explain why your approach is to be preferred
• Include comparable evidence clearly. A schedule of comparable sales, with addresses, dates, prices, and lease terms, is far more useful than a narrative description

Professional presentation matters: BundleCreator.co helps you compile, paginate, and index your tribunal bundle — ensuring your valuation evidence and supporting documents are clearly organised and easy to navigate.

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The Tribunal Hearing

Format

Premium dispute hearings typically last between half a day and a full day, depending on the complexity of the valuation issues. The tribunal panel will usually comprise a legally qualified chair and a surveyor member — the surveyor bringing technical expertise to the valuation questions.

The Hearing Process

1. Expert evidence. Both surveyors will typically give evidence and may be cross-examined by the other party. If you are a leaseholder acting in person, you may question the freeholder's surveyor on their report.
2. Legal submissions. Where there are legal issues (for example, the correct interpretation of the lease terms, or the applicability of marriage value), these will be addressed through submissions.
3. The tribunal's approach. The tribunal is not bound to adopt either expert's valuation. It frequently takes elements from both reports, applying its own judgment to determine the appropriate rate or value where the experts disagree.

What the Tribunal Considers

The tribunal will focus on:

• The unimproved value of the flat (improvements made by the leaseholder are disregarded)
• Whether the capitalisation and deferment rates are appropriate for this particular property
• The comparable evidence supporting each party's valuation of the existing and extended lease values
• Whether marriage value applies and, if so, how it should be calculated
• Whether any compensation for other loss is payable

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The 80-Year Threshold: Why Timing Matters

The single most important variable in lease extension premium disputes is the unexpired lease term. As the lease drops below 80 years, marriage value becomes payable, and the premium increases — often dramatically.

Consider this simplified illustration:

These figures are illustrative only and depend heavily on the specific property, location, and valuation assumptions. But they demonstrate why acting before the 80-year mark is so important — and why, if you are already below 80 years, the precise valuation methodology matters enormously.

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Common Mistakes in Premium Disputes

Not instructing a specialist surveyor. Lease extension valuations require specific expertise. A general practice surveyor may not have the knowledge of relativity graphs, deferment rates, and Upper Tribunal authorities needed to produce a robust report. Instruct someone with demonstrable experience in leasehold enfranchisement.

Relying on online calculators without expert support. Online premium calculators can provide a rough estimate, but they make standardised assumptions that may not reflect your property's circumstances. The tribunal expects expert evidence, not a printout from a website.

Ignoring the counter-notice. If you disagree with the freeholder's proposed premium, do not simply wait and hope. Engage your surveyor, obtain comparable evidence, and prepare your case. Failing to respond substantively to the counter-notice weakens your position.

Failing to gather comparable evidence early. Comparable sales data is the bedrock of any valuation argument. Start collecting it as soon as the dispute arises — Land Registry data, estate agent records, and auction results are all relevant sources.

Presenting a disorganised bundle. The tribunal will read two expert reports containing detailed calculations and numerous comparable transactions. If these are buried in a chaotic, unpaginated bundle, the tribunal's patience — and your credibility — will suffer.

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Frequently Asked Questions

How long does a premium dispute take at the tribunal?

From application to determination, the process typically takes three to six months. The tribunal will issue directions setting a timetable for exchange of expert reports and list a hearing date. Straightforward cases may be determined on the papers without a hearing.

Can I negotiate after applying to the tribunal?

Yes. Many premium disputes settle after the tribunal application is made, often once both parties have seen the other side's valuation evidence. Settlement can be agreed at any stage before the tribunal makes its determination.

What if the Leasehold and Freehold Reform Act 2024 abolishes marriage value?

The 2024 Act includes provisions to abolish marriage value, but as at March 2026 these have not been brought into force. Until commencement, marriage value remains payable for leases under 80 years. If you are extending a lease currently below 80 years, it is prudent to proceed under the existing law rather than waiting for provisions that have no confirmed commencement date.

Do I need a solicitor as well as a surveyor?

For straightforward premium disputes, a specialist surveyor may be all you need — the dispute is essentially a valuation exercise. However, if there are additional issues (such as the terms of the new lease, or a dispute about whether you qualify for a statutory extension), legal advice is worthwhile.

What happens if I cannot afford the premium the tribunal determines?

You are not obliged to proceed with the lease extension once the premium is determined. However, if you withdraw, you will normally be liable for the freeholder's reasonable costs incurred as a result of the claim. Consider your financial position carefully before commencing the process.

Is the tribunal's determination final?

Either party can appeal to the Upper Tribunal (Lands Chamber) on a point of law, with permission. Permission is not always granted, and the threshold for overturning a valuation determination is high. Most decisions of the First-tier Tribunal on premium are final in practice.

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Take Control of Your Lease Extension

A premium dispute does not need to be daunting. With the right valuation evidence and a well-prepared bundle, you can present your case clearly and give the tribunal everything it needs to reach a fair determination.

BundleCreator.co takes the stress out of bundle preparation — automatically paginating, indexing, and organising your documents so that your valuation evidence is presented professionally and accessibly.

Build your lease extension tribunal bundle at BundleCreator.co →