How a statutory lease-extension premium is constructed

The landlord gives up the right to receive the existing ground rent for the remainder of the lease. A calculation converts that future income stream into a present value using an investment yield.

Without an extension, the property would return to the landlord when the lease expires. The calculation estimates the present value of giving up that future right, using the property value, years remaining and a deferment rate.

Where the current statutory rules require it, marriage value may be added. Compensation can also arise for other losses in particular circumstances.

Small changes to property value, relativity, yields or dates can change the output. A useful report should expose those assumptions and show sensitivity rather than presenting one number as certain.

A calculation range is guidance based on selected inputs. It does not account for every legal issue, property characteristic, inspection finding or negotiating consideration and does not approve a figure for a statutory notice.