Does the publication of the Draft Commonhold and Leasehold Reform Bill make any change to the amount I will pay when extending my lease or buying the freehold?
Mark Chick | Senior Partner | Landlord & Tenant | Bishop & Sewell
The recent publication of the Draft Commonhold and Leasehold Reform Bill (27 January 2026) has raised as many questions as it has answered, primarily in the form of “stay or go” questions from leaseholders.
We are typically being asked: “Does the fact that ground rent might be capped in the future and eventually have a sunset clause mean that I would pay less for my lease extension?”
The answer to this at the time of writing is ‘no,’ as nothing has changed regarding valuation methodology.
The question would be, if and when such changes are enacted, how the market will react to these, and whether ultimately these would need to be taken into account in an enfranchisement valuation?
The draft publication around the legislation indicates that the earliest this change might come into effect is 2028. The proposed cap on ground rents and an eventual sunset clause in 40 years’ time, represents a significant value shift from freeholders to leaseholders (in excess of 50%) and there is also every possibility of a Human Rights Act challenge, delaying implementation further.
LAFRA and possible delays
As has been seen with the Leasehold & Freehold Reform Act 2024 (‘LAFRA’), there have been significant delays in implementation of the valuation parts of this legislation due to a Human Rights Act challenge made by large freeholders and pension funds. It is clear that those who have invested in long term reversionary ground rents will have significant resources to throw at this, should they wish to do so, and it is quite likely there may be a further challenge to the implementation of the proposed cap on ground rent.
Ultimately, it is for individual leaseholders to decide whether they want to proceed now, or to wait. And as things stand in terms of the correct application of valuation principles to claims made under the Act, these changes (even if they eventually come into effect) do not have a direct impact on the valuation methodology.
Once in force (assuming it comes in as drafted) will it make a difference?
Of course, if (after commencement) there is a real-world adjustment in what a freeholder could sell their interest for, then eventually there will probably be an acceptance of this following litigation, and there may be some further impact.
We might also see (eventually) the enactment of the valuation provisions of LAFRA which will further improve things from the point of view of the leaseholder. However, I cannot stress enough that these changes are not yet in force.
In the short term, the margins of any benefit in waiting may not be that significant. This will of course depend on the numbers involved. However, if you were to wait, then the lease will become shorter and so there is also an increase in the cost of extending because of the shortening lease length and the increase in value, in what is known as the ‘reversion’ (the value of the freehold interest at the end of the lease term).
What about the rates used in the calculations?
The rates applicable to this are now subject to consultation, but given the Act’s other major adjustments, it seems perhaps unlikely that the deferment rate will be changed and, if at all, not that dramatically.
In addition, the cost will depend upon the capitalisation rate eventually adopted to work out the loss of the ground rent income during the relevant period and the value of the future ground rent rises under the terms of your leases. It is not possible to give a precise numerical answer to this.
The capitalisation rate may also not be subject to significant adjustment and if I were to place a bet on this now, I would suggest that this rate would remain the same as per current calculations. However, this is just a ‘guess’ as we have not seen the rates consultation and how government will then respond to that.
What will the difference be?
Against the context of the property valuations generally, the amounts of difference at this stage may well be reasonably modest and therefore leaseholders may feel on balance that that they wish to proceed with a lease extension, mainly due to the delays in implementing LAFRA.
For anyone looking to sell or remortgage in the near future, an extended lease at a nil rent will of course be more marketable, and in a future world in which ground rents become less common (as will no doubt eventually become the case) it will have an overall beneficial impact on marketability in the longer term.
As ever, any decision on which course of action to take is one for the individual to make based on their own personal situation and likely intentions for the property.
You can view Bishop & Sewell podcast series, Listen Without Prejudice, which includes a number of episodes on leasehold issues, via Apple, YouTube and Spotify.
Mark Chick is Senior Partner at Bishop & Sewell and a member of the Landlord & Tenant team.
Email [email protected] or call 020 7631 4141.
The above is accurate at 24th February 2026 and may be subject to change. The content of this article should not be considered legal advice, and each matter should be considered on a case-by-case basis.
