Short Lease Value Calculator
Estimate what a leasehold interest is worth against the freehold as the term runs down, using a deferment rate and the ground rent.
💼 Are you a real estate agent or broker? Send this calculator to your buyers on your own branded listing page — every enquiry comes straight to your WhatsApp. Create free agent page →A leasehold interest is the freehold minus what the freeholder gets back at the end. The nearer that end, the more the freeholder's reversion is worth today and the less the lease is — which is why value falls slowly for decades and then steeply.
The model here discounts the freeholder's reversion and the ground rent income at a deferment rate. It is the standard financial framework, and it deliberately excludes marriage value and other statutory adjustments, which are set by local law.
The model
The freeholder gets the property back in n years, worth freehold value ÷ (1 + deferment rate)^n today, and collects the ground rent meanwhile, worth ground rent × (1 − (1 + d)^−n) ÷ d. The lease is worth the freehold value less both.
Worked example
A property worth 400,000 freehold with 70 years left, a 5% deferment rate and a 250 ground rent. The reversion discounts to about 13,146 and the ground rent income to 4,836, so the lease is worth roughly 382,018 — 95.5% of the freehold. At 30 years remaining the same model gives about 303,600, or 75.9% — the fall accelerates sharply as the term shortens.
What this deliberately leaves out
Many jurisdictions add marriage value once a lease falls below a threshold, and market relativity for short leases is often below what a pure discounting model gives. Where you are valuing a genuinely short lease, use local relativity evidence rather than this model alone.
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Create your free property pageFrequently asked questions
Why does value fall faster as the lease shortens?
Because the freeholder reversion is discounted over fewer years, so its present value rises exponentially as the end approaches. A drop from 90 to 80 years costs very little; from 40 to 30 costs a great deal.
What deferment rate should I use?
It is set by convention and case law in each jurisdiction, commonly around 4.75% to 5.5% for residential. Using a rate outside the local norm produces a number nobody in that market will accept.
At what length does a lease become a problem?
Lenders in many markets become cautious below about 80 years and reluctant below 70, and marriage value often begins at 80. The practical threshold is set by what lenders will accept locally, since that determines who can buy it.