The 1993 Act enables eligible leaseholders to acquire a 90-year extension to their existing lease, subject to a peppercorn ground rent. To qualify to extend the lease of flat or house:

• The lease must have been granted for a term of over 21 years. The term remaining on the lease is irrelevant.
• The tenant must have owned the property for at least two years, although where a property is being sold, the seller can serve the initial notice on behalf of the buyer so the buyer does not then have to wait for two years to qualify.

The principle components of the premium are:

• Compensation to the landlord for the (capitalised) loss of any ground rent payable.
• Compensation to the landlord for the loss/deferment of his reversion. There is a general principle that the tenant should not pay a premium which reflects the value of any improvements which he or his predecessors have undertaken since the grant of the lease.
• Marriage value – which is the value of all the interests in the property after enfranchisement, less the aggregate value of all the interests in the property prior to enfranchisement. It represents the value released by ‘marrying’ the freehold and leasehold interests.

NOTE – The landlord will receive 50% of the marriage value where the unexpired term of the tenant’s lease is under 80 years at the date of valuation. If there is over 80 years left on the lease, no marriage value is payable. Therefore, the cost of the premium payable increases significantly when less than 80 years remain on the lease.