Leasehold explained: extensions, right to manage, service charges and ground rent
Most leasehold content published since 2024 tells you marriage value has gone and extensions now run to 990 years. Neither is in force. Here is what the law actually is today, what it costs, and where the tax lands.
The structure
What leasehold actually is
A leasehold owner owns a lease, which is a wasting asset: the right to occupy a property for a fixed number of years, granted by a freeholder who keeps the underlying ownership. Everything difficult about leasehold follows from that one fact. The lease shortens every year, the freeholder retains rights over the building, and the leaseholder pays for services they do not control.
Parliament has answered that with statutory rights rather than a single code, which is why the law sits in five or six separate Acts rather than in one place.
This page describes the position in England. Wales shares most of the primary statutory framework but some regulations, including the right to manage model articles, are made for England separately. Scotland abolished long residential leases and has no equivalent regime, and Northern Ireland has its own.
- 1967
Leasehold Reform Act 1967
Houses. The right to buy the freehold, or take a 50-year extension.
- 1985
Landlord and Tenant Act 1985
Service charges. Reasonableness, consultation and the 18-month rule.
- 1993
Leasehold Reform, Housing and Urban Development Act 1993
Flats. The right to extend a lease and to enfranchise collectively.
- 2002
Commonhold and Leasehold Reform Act 2002
Management, including the no-fault right to manage.
- 2022
Leasehold Reform (Ground Rent) Act 2022
Ground rent on new qualifying long leases, limited to a peppercorn.
- 2024
Leasehold and Freehold Reform Act 2024
Amends several of the above, but only in part. This is where the confusion starts.
Mostly not yet in force
Commencement
What is actually in force under the 2024 Act
The Leasehold and Freehold Reform Act 2024 received Royal Assent, and that is where most reporting stopped. An Act on the statute book does nothing until its provisions are commenced by statutory instrument, and as at August 2026 exactly three commencement instruments exist: SI 2024/1018, SI 2025/57 and SI 2025/131. Three of the four headline reforms have not been commenced at all.
31 October 2024in force
Building safety amendments commenced
SI 2024/1018. The remediation order machinery is live.
January 2025in force
Two-year ownership rule abolished
A buyer can serve an extension notice immediately on completion. No waiting period.
3 March 2025in force
Right to manage reforms commenced
SI 2025/131. Non-residential limit raised from 25% to 50%, the tribunal becomes first instance, and the RTM company no longer pays the landlord's process costs as a general rule.
24 October 2025in force
Judicial review dismissed, appeal pending
The Divisional Court dismissed the freeholders' challenge to the marriage value, ground rent and costs provisions. The Court of Appeal has since given permission to appeal.
23 September 2026not commenced
Valuation consultation closes
Prescribed deferment and capitalisation rates remain uncommenced. The post-Sportelli 5% deferment rate is still the working rate.
No date setnot commenced
Marriage value, 990-year terms, costs and transparency
Marriage value abolition, the 990-year term, the section 60 costs repeal and service charge transparency are all uncommenced. Commencement is a governmental act, and the government has not exercised it.
| Provision | Status | What it means today |
|---|---|---|
| Two-year ownership rule abolished | In force (January 2025) | A buyer can serve an extension notice immediately on completion. No waiting period. |
| Right to Manage reforms (ss.49 to 52, s.64) | In force (3 March 2025, SI 2025/131) | Non-residential limit raised from 25% to 50%, tribunal is first instance, and the RTM company no longer pays the landlord's process costs as a general rule. |
| Building safety amendments (ss.114 to 116, s.120) | In force (31 October 2024, SI 2024/1018) | Remediation order machinery is live. |
| Marriage value abolition | Not in force | Marriage value remains payable in full on any lease with under 80 years unexpired. This is the single most misreported point in leasehold coverage. |
| 990-year lease term at a peppercorn | Not in force | A statutory extension of a flat completed today adds 90 years to the existing term, at a peppercorn ground rent. |
| Prescribed deferment and capitalisation rates | Not in force. Consultation closes 23 September 2026 | The post-Sportelli 5% deferment rate remains the working rate. Prescribed rates could move premiums either way. |
| Service charge transparency (ss.53 to 58) | Not in force | Landlord and Tenant Act 1985 sections 18 to 30 and SI 2003/1987 remain the operative regime. |
| Extension and enfranchisement costs reform (s.60 repeal) | Not in force | You still pay the freeholder's reasonable legal and valuation costs on an extension claim, even though you no longer do on an RTM claim. |
| £250 ground rent cap | Draft Bill only | Sits in the Commonhold and Leasehold Reform Bill, not in the 2024 Act. It is not law and should never be planned around. |
Note: Example figures displayed
Status checked against the commencement register on 15 August 2026. We re-check it before updating any leasehold page, and again after the valuation consultation closes on 23 September 2026.
The freeholders challenged the marriage value, ground rent and costs provisions by judicial review. The Divisional Court dismissed the challenge on 24 October 2025, and the Court of Appeal has since given permission to appeal, so a second round is pending. Neither outcome commences or suspends anything: commencement is a purely governmental act, and the government has not exercised it for the valuation provisions.
The practical rule for anyone making a decision this year is simple. Plan on the law as it is, not as it is drafted to become, and price any claim on the assumption that marriage value is payable.
Section 42
Lease extension: what drives the premium
A qualifying flat leaseholder has a unilateral right under Chapter II of the 1993 Act to extend: serve a section 42 notice, and the freeholder must grant a new lease of the existing unexpired term plus 90 years, at a peppercorn ground rent. There is no negotiation about whether it happens, only about the price. Since January 2025 there is no qualifying ownership period, so a buyer can serve notice on the day of completion.
Three components, discounted at a statutory deferment rate
Term
The value to the freeholder of the ground rent still to be received over the unexpired term.
Reversion
The deferred value of getting the flat back when the lease ends, discounted at the post-Sportelli 5% deferment rate.
Marriage value
The uplift in combined value created by merging the freehold interest with a longer lease. Payable only where the unexpired term is under 80 years, and still payable, because the abolition in the 2024 Act is not in force.
80 years or more unexpired
Term + reversion only
No marriage value.
Under 80 years unexpired
Term + reversion + marriage value
The premium steps up sharply and keeps climbing as the term shortens.
If your lease is near 80 years, the date you serve notice matters more than anything else on this page.
Note: Example figures displayed
Costs sit on top of the premium. You pay your own legal and valuation fees and, because the section 60 costs repeal in the 2024 Act is not in force, the freeholder's reasonable legal and valuation costs as well. A realistic all-in figure is commonly 1.3 to 1.8 times the headline premium. An individual flat extension typically runs 6 to 12 months, collective enfranchisement 9 to 18 months.
Houses work differently. Under the 1967 Act a qualifying house leaseholder can either buy the freehold outright or take a 50-year extension at a modern ground rent. In practice almost everyone buys the freehold, because it ends the leasehold structure rather than deferring it. Collective enfranchisement of a block needs at least 50% of qualifying tenants to participate, which is a coordination problem more often than a legal one.
Taking over
Right to manage: control without buying anything
Right to manage under Part 2 of the Commonhold and Leasehold Reform Act 2002 moves the management functions of a building to a company owned by the leaseholders. It is a no-fault right, so there is nothing to prove: no mismanagement, no negligence, no dispute required. What does not move is ownership. The freeholder remains the freeholder, the lease terms are untouched, and ground rent stays payable.
The 2024 Act reforms to right to manage are the ones that did commence, and they changed three things worth knowing.
What changed on 3 March 2025, under SI 2025/131
Non-residential floor space limit of 25%
Raised to 50%, bringing many shop-and-flats buildings into scope for the first time
High Court as the first instance forum
First-tier Tribunal is now first instance
RTM company paid the landlord's process costs, win or lose
General rule is no liability, with a narrow exception where a claim is withdrawn and the company acted unreasonably
What does not move is ownership. The freeholder remains the freeholder, the lease terms are untouched, and ground rent stays payable.
The mechanics are strict and the deadlines are statutory. The RTM company must be a private company limited by guarantee using the prescribed model articles, membership at the point of service must cover qualifying tenants of at least half the flats, and the claim notice must allow the landlord at least one month to serve a counter-notice. Get a notice wrong and the claim fails on procedure rather than on merit.
Disputes
Service charges: what you can actually challenge
Service charges are governed by the Landlord and Tenant Act 1985, not by the 2024 Act, because the transparency provisions in Part 4 of the 2024 Act have never been commenced. The 1985 Act gives four levers that matter: costs must be reasonably incurred and the work of a reasonable standard, major works need formal consultation, demands are time limited, and the First-tier Tribunal can determine liability.
The consultation thresholds are the ones most often misquoted, and the 18-month rule is the one most often assumed to be absolute.
£250
Qualifying works
Consultation is required where the works would cost any one leaseholder more than this. Per leaseholder, not per building or per project.
£100
Long term agreements
Consultation is required where a qualifying long term agreement would cost any one leaseholder more than this in an accounting period.
18 months
The demand window
A landlord cannot demand a charge more than 18 months after the cost was incurred, unless it notified leaseholders within that time that a demand would follow.
Note: Example figures displayed
Where the landlord fails to consult, the recoverable amount is capped at those figures, although the tribunal can dispense with consultation where leaseholders suffered no real prejudice. On the 18-month rule, the notification limb is what turns it from a hard bar into a conditional one, and it is where most 18-month arguments are actually won or lost.
Tribunal applications carry a fee. From 6 July 2026 an application to determine service charge liability costs £114 to issue and £227 if it goes to a hearing.
Law against draft
Ground rent: three separate states, constantly confused
Almost every ground rent question resolves once you separate three things that most coverage runs together.
New leases
The Leasehold Reform (Ground Rent) Act 2022 limits ground rent on new qualifying residential long leases to a peppercorn. Commenced by SI 2022/694 on 30 June 2022, and on 1 April 2023 for retirement home leases. A prohibited term is automatically treated as a peppercorn, and an enforcement authority can impose a penalty of between £500 and £30,000 per breach, with refund orders on top.
Existing leases
The 2022 Act does not touch a lease granted before it commenced. A doubling clause or an RPI-linked escalator in a 2015 lease is enforceable exactly as drafted. The statutory escape route is a lease extension, because a statutory extension takes effect at a peppercorn.
The £250 cap
It sits in the draft Commonhold and Leasehold Reform Bill. It is not in the 2024 Act, it has not been enacted, and it should not appear in any calculation you rely on.
One historic worry has genuinely closed. A long lease with ground rent above £250 a year, or £1,000 in Greater London, could technically fall within the assured tenancy rules, which caused years of lender caution about doubling clauses. Fixed-term tenancies exceeding 21 years are now excluded from assured status regardless of the rent level.
Stamp duty and gains
The tax nobody mentions until completion
Stamp duty on an extension premium
5%surcharge on the whole premium at £40,000+
A statutory lease extension is treated for stamp duty land tax as a surrender of the old lease and the grant of a new one, so the premium is chargeable consideration. Rent at a peppercorn contributes nothing to the net present value calculation, so in practice the premium is the charge. The trap is the additional dwellings surcharge: where the premium reaches £40,000 and you already own another residential property, the 5% surcharge applies to the whole premium. That catches a meaningful share of London and South East extensions, and it is routinely missed until the return is prepared.
Collective enfranchisement is calculated differently
Per flatrates applied to the divided figure, then multiplied back up
The total consideration is divided by the number of qualifying flats, the rates are applied to that per-flat figure, and the result is multiplied back up. Because the per-flat fraction often falls in or below the nil rate band, the charge is usually far lower than applying the rates to the aggregate price. Buying the freehold of a house is a straightforward purchase taxed in the ordinary way.
Capital gains tax
£0for the leaseholder. 18% and 24% for the freeholder
The leaseholder has no capital gains tax charge on extending or enfranchising, because money is going out rather than coming in. The premium is capital expenditure that increases the base cost of the property for a future disposal, so keep the paperwork. The freeholder is the one making a disposal, taxed at residential rates of 18% and 24% for an individual or within the corporation tax charge for a company.
Deductibility on a let flat
£500,000the ATED point to re-check after a revaluation
Ground rent and service charges are revenue expenses and come off rental income in the normal way. The extension premium does not: it is capital, and the distinction is absolute rather than a matter of degree. If the flat is held in a company and a revaluation after extension pushes it over £500,000, check the annual tax on enveloped dwellings position before the next valuation date.
Put the premium through the stamp duty calculator
Enter the premium as the purchase price. If you already own another residential property, the stamp duty calculator will show the surcharge on the whole figure.
Next steps
Where to start if your lease is getting short
Three things, in this order. The first one decides whether the other two are urgent.
- 01
Find the unexpired term
From the lease itself or the title register, and work out how far it is from 80 years. That single number decides whether this is urgent or merely important. Under 85 years and you should be getting a valuation now, because a claim served before the term passes 80 avoids marriage value entirely.
- 02
Decide the route
Extend, enfranchise, take over management, or do nothing for now. They answer different problems. Extension protects value and mortgageability. Enfranchisement removes the freeholder. Right to manage fixes bad management without buying anything. Doing nothing is a real option on a lease with 120 years left and a competent managing agent.
- 03
Line up all three advisers before serving notice
Our side of it is the tax: the stamp duty on the premium, whether the surcharge bites, what is deductible against rent, and how the premium affects the eventual gain. The valuation and the notices are a surveyor and a solicitor. Getting all three lined up before serving notice is what stops a claim becoming expensive.
Free consultation
Check the tax before you serve notice
Book a free consultation. We will look at the stamp duty on the premium, the surcharge position, and what the extension does to your eventual capital gains tax.
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- Fixed fees, quoted upfrontIn writing, before any work starts
- 24-hour responseUsually the same working day
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