What is Relativity?
If you've received a lease extension valuation, you may have noticed a term that sounds like it belongs in a physics classroom: relativity. In the context of lease extensions, relativity has nothing to do with Einstein. Instead, it's a valuation concept that can significantly affect how much you'll pay to extend your lease.
Relativity is the relative value of your property on its current short lease compared to what it would be worth with a long lease. Think of it as measuring how much of your property's full value you currently possess. A flat with 70 years remaining might have a relativity of 85%, meaning it's worth approximately 85% of what it would be worth with a lease of 99 years or more.
This percentage directly impacts your lease extension premium. The lower the relativity, the more you'll typically pay to extend. Understanding how relativity works puts you in a stronger position when navigating the lease extension process.
A Simple Example
Imagine you own a flat worth £300,000 with a long lease. If your lease has dropped to 70 years remaining, a surveyor might determine the relativity at 85%. This means your flat in its current state is worth approximately £255,000 (85% of £300,000).
The £45,000 difference between the long lease value and your current short lease value represents the "gap" that relativity measures. This gap becomes crucial when calculating your lease extension premium because it forms the basis of what's called marriage value.
Why Relativity Matters to You
Understanding relativity is important because it directly affects how much money leaves your pocket. When you extend your lease, you're not just paying for the landlord's loss. If your lease is under 80 years, you must also share the increase in value that the extension creates. The lower your relativity percentage, the larger this value increase, and the more you'll pay.
Relativity also matters because it's often a point of contention between leaseholders and freeholders. Your surveyor and the freeholder's surveyor may disagree on what relativity percentage applies to your property. Understanding the concept helps you ask better questions and recognise when something doesn't look right in your valuation.
How Relativity is Calculated: Two Methods
There are two primary methods for calculating relativity, and they can produce different results. Understanding which method applies to your situation is crucial.
Method 1: Local Market Comparables (The Gold Standard)
The preferred method for determining relativity is analysis of actual market transactions. If there are recent sales of similar properties in your area with roughly simillar short lease lengths, this real-world evidence provides the most accurate measure of what short-lease properties are actually selling for.
This approach is considered the gold standard because it reflects what buyers are genuinely willing to pay in today's market. The Court of Appeal has made this preference clear, stating that "the market may not be perfect but it is still the market." Actual transactions trump theoretical models because they show what is really happening, not what a formula predicts should happen.
Why Local Market Evidence Often Shows Lower Relativity:
Unfortunately this can work against you: local market comparables tend to produce lower relativity figures than the standard graphs and curves.
Why? Because mortgage lenders today are far stricter than they were during the periods that informed the original relativity graphs. Most lenders now require at least 70-85 years remaining at the start of the mortgage, and many simply won't lend on leases under 60-70 years. This dramatically reduces the pool of potential buyers for short-lease properties. On top of the increased general awareness of the issues of leasehold property makes these properties sell for less than they used to.
The relativity graphs were developed using evidence from times when buyers were more relaxed. For you as a leaseholder, lower relativity from market evidence can actually mean a significantly higher premium, because it more accurately reflects the genuine market discount that short leases suffer.
Method 2: Relativity Curves and Graphs
When local market evidence is unavailable or insufficient, valuers turn to relativity graphs. These are mathematical models developed from historical transaction data and settlement evidence that estimate what relativity should be at different lease lengths.
The Main Graphs Used:
Gerald Eve 2016 Graph: Created by one of the UK's leading property consultancies following the landmark Mundy v Sloane Stanley Estate case. It's based on analysis of settlement evidence and market transactions, and has become the most influential relativity graph in use today. The Upper Tribunal described it as providing "probably the least unreliable figure of those available" when market evidence is lacking.
Savills 2015 Enfranchiseable Graph: This shows "real world" relativity based on actual market transactions of leasehold flats. Savills used hedonic regression analysis of over 5,000 flat sales in prime central London to develop this curve. However, it measures flats with the right to extend.
Savills 2016 Unenfranchiseable Graph: This adjusts the enfranchiseable graph downward to account for the statutory assumption that the flat has no right to extend. It provides lower relativity figures, which increases the premium payable.
There are many other relativity curves which may be more suitable depending on the specific property and local market. This is one of the reasons why it is essential to get a RICS valuation to ensure that the best possible graph can be used to argue your case.
What the Tribunal Uses
When leaseholders and freeholders can't agree on the premium, the case goes to the First-tier Tribunal (Property Chamber). The Tribunal has developed a clear hierarchy for relativity evidence.
The Preference Order:
- Local market comparables (when robust evidence exists)
- Blended graph approach (when market evidence is insufficient)
For the blended approach, the Zucconi case (2019) established the standard method. The Tribunal directed that relativity should be calculated as an average of the Gerald Eve 2016 graph and the Savills unenfranchiseable rate. This was confirmed in the Deritend Investments case (2020).
However, and this is crucial, the Tribunal will prefer market evidence if it exists. In the 2024 Daejan Investments Ltd v Nigel case, the Upper Tribunal found "no reason to compare the value to relativity graphs" where reliable market evidence was available. The graphs were required only for "cross-checking" where market evidence was not available.
The principle is clear: market evidence is preferred. Graphs are the fallback, not the default.
Why Lower Relativity Costs You More
This is counterintuitive, so it's worth explaining clearly. A lower relativity percentage means your property is worth less on its current short lease. A larger gap exists between its current value and what it would be worth extended.
When you extend, you're creating value by closing that gap. Under the current law, you must share 50% of that created value with your freeholder. The bigger the gap, the more marriage value there is to share, and the higher your premium.
A Worked Example
Consider a flat worth £400,000 with a long lease. At 70 years remaining:
If relativity is 85%:
- Current short lease value: £340,000
- Marriage value: £400,000 - £340,000 = £60,000
- Your share to freeholder: £30,000
If relativity is 80%:
- Current short lease value: £320,000
- Marriage value: £400,000 - £320,000 = £80,000
- Your share to freeholder: £40,000
That 5% difference in relativity costs you an extra £10,000. This is why freeholders often argue for lower relativity: it directly increases what they receive.
The Freeholder vs Leaseholder Dynamic
Relativity is inherently adversarial. The lower the relativity, the more the freeholder receives. This creates an incentive for freeholders' surveyors to argue for lower figures. Freeholders will often try to use comparable sales evidence to push relativity down. They might cite distressed sales or unusual transactions that show low values for short-lease properties. Some will even try to challenge relativity graphs entirely, arguing they overstate relativity.
Will Leasehold Reform Change Relativity?
The Leasehold and Freehold Reform Act 2024 promises significant changes to how lease extension premiums are calculated. Most importantly, marriage value is set to be abolished entirely.
If marriage value no longer exists, relativity becomes largely irrelevant. Without the need to calculate the "value uplift" from extending, there's no need to determine what your flat is currently worth on its short lease.
The Uncertainty
However, as of December 2025, the full reforms are not yet in force. Secondary legislation is needed to implement the new valuation framework, including prescribed rates for other elements of the calculation. The Government has indicated these reforms are coming, but the exact timing remains unclear.
Freeholder groups have also launched legal challenges arguing the reforms breach their human rights. While the High Court dismissed these challenges in October 2025, appeals may follow.
What Should You Do Now?
For leaseholders with sub-80-year leases, the potential abolition of marriage value could mean significant savings. However, "potential" is the key word. Until the reforms are fully implemented, the current system applies. Every month you wait, your lease gets shorter, and under the current rules, that means higher costs.
The prudent approach is to get a free lease report to understand your current position. If your lease is approaching 80 years or you need to sell or remortgage, waiting for uncertain reforms may not be practical.
Key Takeaways
- Relativity is the percentage value of your flat on its current short lease compared to its value with a long lease
- Two calculation methods exist: local market comparables (the gold standard) and relativity curves (used when market evidence is unavailable)
- Local market evidence is preferred by tribunals and often produces lower relativity than graphs
- Market comparables tend to show lower values because today's stricter mortgage lending reduces the buyer pool for short-lease properties
- Relativity curves should only be used when insufficient local market evidence exists
- The Tribunal uses a blended average of the Gerald Eve 2016 and Savills unenfranchiseable graphs (following Zucconi and Deritend) when graphs are necessary
- Lower relativity means higher costs for you as a leaseholder
- Leasehold reform may abolish marriage value, making relativity irrelevant, but timing is uncertain
- Professional advice is essential because the method used significantly impacts your premium
In Summary
Relativity is a technical concept, but its impact on your wallet is very real. The crucial point to understand is that there are two ways to determine it: local market comparables and relativity curves. Local market evidence is the gold standard and should be used wherever possible. Curves are a fallback for when genuine market data isn't available.
Because mortgage lenders are stricter today than in the past, actual market transactions often show short-lease properties trading at lower values than the older graphs predict. This can work in your favour if your surveyor can demonstrate robust local evidence.
If you're uncertain about the relativity used in your valuation, or want to understand how it affects your specific situation, start with a personalised assessment. Get your free lease report to see how your lease length impacts your costs, and speak to our RICS-regulated valuers who can explain exactly what method should be used for your property and why.
