The UK Government launches long-awaited leasehold enfranchisement consultations: what property owners need to know

The government has launched two significant consultations under the Leasehold and Freehold Reform Act 2024 (LAFRA 2024), marking an important step in the implementation of leasehold reform. Both consultations close on 23 September 2026 and seek views on changes that could have a substantial impact on the cost of lease extensions and freehold acquisitions in England and Wales.

Most notably, the consultation on leasehold enfranchisement valuation rates addresses a long-standing issue that the sector has been awaiting clarification on for several years: how deferment and capitalisation rates should be set when calculating enfranchisement premiums. Alongside this, the government is consulting on the recovery of legal and valuation costs in enfranchisement claims.

The valuation rates consultation

The LAFRA 2024 introduces a new Standard Valuation Method for calculating the price payable when a leaseholder extends their lease, acquires the freehold of their property or buys out a ground rent. To support this new framework, the government is proposing to prescribe the deferment rates and capitalisation rates used in enfranchisement valuations.

These rates are among the most important assumptions in leasehold valuation calculations. As a result, any changes could significantly affect enfranchisement premiums across the market.

The long-awaited review of Sportelli

A key feature of the consultation is the publication of the Government Actuary’s Department (GAD) report reviewing the deferment rates established by the landmark Cadogan v Sportelli decision in 2005. For more than 20 years, Sportelli has provided the standard deferment rates of:

• 4.75% for houses
• 5.00% for flats

GAD was asked to assess whether these rates should be updated using modern economic data and valuation assumptions. Its analysis concludes that there are several possible approaches, producing rates ranging from around 5.05% to 6.05% for houses, depending on the methodology adopted. GAD’s preferred approach suggests a deferment rate of 6.05% for houses and 6.3% for flats.

The government is now seeking views on how these rates should ultimately be prescribed in legislation.

Why does this matter?

The deferment rate is a discount rate used when valuing a landlord’s future interest in a property. Changes to the rate can materially affect the premium payable for enfranchisement claims. Similarly, capitalisation rates are used to value future income streams such as ground rent and can have a significant impact on valuation outcomes.

Given the potential financial implications, the consultation is likely to attract considerable interest from leaseholders, landlords, valuers and property professionals.

The process costs consultation

The government has also launched a separate consultation on leasehold enfranchisement process costs. This concerns the legal and valuation costs incurred during lease extension and freehold acquisition claims.

Historically, leaseholders have often been required to pay not only their own professional costs but also many of the landlord’s reasonable legal and valuation fees. The LAFRA 2024 seeks to reverse this position by introducing a general rule that each party should bear its own non-litigation costs.

The consultation focuses on how certain statutory exceptions should operate, including:

• Claims of low value;
• Claims that fail because of a leaseholder’s act or omission;
• Certain collective enfranchisement claims involving leasebacks; and
• A proposed new exception for certain third parties, such as resident-led management organisations, where they may otherwise face financial hardship.

The government is also seeking evidence on the levels of costs currently incurred in enfranchisement transactions and on the proposed caps that may be applied to recoverable costs in future.

What happens next?

Both consultations will remain open until 11:59pm on 23 September 2026. Following the consultation period, the government will consider responses before introducing the secondary legislation needed to implement these aspects of the LAFRA 2024.

The proposed reforms are intended to make enfranchisement rights simpler, more transparent and more affordable. However, the detail of the valuation rates and cost recovery provisions will be crucial in determining the practical impact of the reforms for both leaseholders and landlords.

How we can help

Our residential estates team continues to monitor developments in leasehold reform and can advise leaseholders, landlords and managing agents on how the proposed changes may affect existing and future enfranchisement claims. If you would like to discuss the implications of these consultations or require advice on a lease extension or freehold acquisition, please get in touch with a member of our team.