Buying a flat with a short lease

Have you found a flat that you love, but are worried about the length of the lease? We look at the issues with buying a flat with a short lease and your options, the pros and cons, so you can ensure you're making a good investment.

Angela Kerr Director, Editor

If you’re buying a flat, chances are it’s leasehold. In which case it’s important to look at how long the lease is. Here’s what you need to know when buying a flat with a short lease.

If you are selling a flat, see our guide to selling a leasehold property.

What is a leasehold flat?

Most flats in England and Wales are sold on a leasehold basis. This means you own the right to occupy the flat for a set amount of time – usually 99 to 999 years. This is a different type of tenure to buying a freehold flat or house.

What is considered a short lease?

The moment a lease drops below 80 years it is considered a short lease and is a problem because it suddenly gets more expensive to extend.

As a result of the ’80 year mark’ anyone thinking about buying a flat with a short lease – ie fewer than about 100 years on the lease – needs to think about the impact the lease length will have while they own the flat or when they come to sell it.

What’s wrong with a short lease?

There are several issues with buying a flat with a short lease:

• Problems getting a mortgage. Many lenders won’t lend on flats with a lease already below the 80-year mark. And even if you can get a mortgage to buy now you might not be able to remortgage to a good rate in the future.  And when it comes to sell, prospective buyers will struggle to get a mortgage. See getting a mortgage on a leasehold property.
• You’ll have to pay for a costly lease extension. You may have to find tens of thousands of pounds to pay for the lease extension – and the cost will go up every day the lease gets shorter. If the flat has between 83 and 100 years remaining on the lease, you must consider the cost of extending it while you own it. Even if you’re planning to move on after a few years, a short lease length could make it hard for you to sell or affect the sale price when you do.
• You could be faced with extortionate costs. If you are buying a flat with a lease just above the 80-year mark, you need to be particularly careful about the cost of the extension. A lease extension can be (relatively) inexpensive for a flat with 82 years remaining, but with 79 years left, the price can treble.
• Seller might not agree to extend the lease. If you’re hoping the seller will extend the lease before you buy, you could ask but they don’t have to. And as the buyer you have no legal right to extend the lease of a property until you have been the registered owner for two years.
• Delays from extending the lease. If your seller does agree to extend their lease, it could add a good few months to the buying process.

Buying a leasehold flat, with a short lease or not, often takes a little longer than with a freehold house and costs a few hundred pounds more as there is more for your legal team to do. For more, see our guide on leasehold conveyancing – fees, process and what to expect.

How much does a short lease devalue a property?

Valuers working on lease extensions sometimes use a formula to work out how much a flat with a short lease is worth compared with a long lease. These estimates usually suggest a flat with 70-years left on the lease will hypothetically be worth about 88% of a flat with a really long lease.

In practice this can’t be relied upon. Generally, a short lease flat is worth what someone will pay for it. An informed buyer will think about how much they would pay if the flat had a long lease. They’ll then deduct the anticipated cost of the lease extension – including the professional fees associated with the transaction. They will knock extra off the sale price for the hassle and risk of doing a lease extension.

The gap between what a flat is worth with a long lease and a short one widens as the lease gets shorter. This is partly because the lease extension will be more expensive, but also because mortgages become scarce, and buyers become limited to those with lots of cash.

Can I extend the lease of the flat to solve the problem?

In principle, yes. There is a legal right that allows a leaseholder to extend their lease and the freeholder can’t say no.

However, the reality isn’t as simple. You need to think about the costs of the lease extension, whether you or the seller will pay these, the risk in the process and the time it will take to complete. When you’re buying a flat with a short lease, the options for extending the lease are below, but none are perfect.

Option A: Ask the seller to extend before you buy – or at the point you complete.

You can ask your seller to extend the lease and only buy the flat when it is done.

The seller will need to find the money to fund the lease extension. If they can’t find it, the alternative is that some of the money you pay to purchase the flat can be used to pay for the lease extension. This is known as a “new lease on completion”.

This is a good option because it means you’re not buying a short lease flat or having to do a lease extension yourself. By the time you move in, it will be done.

The main disadvantage of this is timing. If your seller does a statutory lease extension it could take a year to complete, and you might not want to wait.

You might be able to speed up the process by asking the seller to negotiate an informal lease extension with their freeholder – but this carries a health warning. All your seller will be interested in is selling the flat – so you need to make sure your solicitor has a chance to review the document that extends the lease before it is agreed between your seller and the freeholder. Your solicitors must make sure that it is a long extension, removes the ground rent and doesn’t allow other changes to be introduced to the lease.

Option B: Ask the seller to start the lease extension process and transfer it to you.

If you don’t want to wait for the above option, an alternative is you can ask the seller to start the lease extension process and have it “assigned” to you.

This option is fraught with challenges – because you are buying a half-finished product. You’re buying a flat with a short lease and inheriting the uncertainty associated with a lease extension.

If you do this, you must take the following steps:

1. Get professional advice on how much it will cost to extend the lease. This online calculator will give an indication of the cost, but this shouldn’t be relied upon. For example, online calculators are not accurate if the ground rent rises. You should make sure your valuer will negotiate the price with your new freeholder. See or guide on Lease Extension Valuation for how to do this.
2. Amend your offer on the purchase price to reflect the cost of doing the lease extension. You should make sure this discount includes the anticipated price, the professional fees, and a contingency for the fact you are taking on the risk and hassle of the process. Reducing the price of a flat to accommodate the cost of a lease extension carries a significant health-warning. This is because there is an odd circularity between how much you pay for a flat with a short lease and the cost of a lease extension. In short, if you negotiate a low purchase price with your seller, your new freeholder can ask for more for the lease extension.
3. Think about finances. Can you get a mortgage for the flat with its existing lease? How are you going to pay for the lease extension once you own the flat? If you decide to keep a portion of your deposit back to pay for the lease extension, you need to consider if this will mean you will be offered a less attractive mortgage rate.
4. Take responsibility for the process. Even the nicest seller won’t care about a lease extension after they’ve sold the flat. Your professional advisors need to ensure that the process is started, transferred, negotiated, and completed correctly.

When choosing a lease extension valuer, you can either select one who is part of an end-to-end service like Homehold or choose a standalone valuer.  

Option C: Buy now, extend later.

The final option is to buy the property now and extend it once you have owned the flat for two years. See our guide on When to extend your lease.

This carries some of the same risks as asking the seller to start the process for you – but does make life easier because you can separate the purchase and lease extension processes.

You should still get professional valuation advice, and still reflect the overall cost of doing the lease extension in the purchase price. Your valuer should give you an indication of what they think the cost of the lease extension should be now, and an indication of what they think it will be in a few years’ time. If you’re near the 80-year mark, you need to be particularly careful.

Critically, with this option, you must come up with a plan for how you’re going to raise the money to extend your lease after you’ve owned the property for two years – and stick to the plan. Don’t assume you’ll be able to borrow the money on your mortgage, because this can be tricky.

Get FREE initial advice and a FREE ESTIMATE of how much your lease extension is likely to cost you from our lease experts

Should I avoid short lease properties for sale?

Yes, if you can. Doing a lease extension is expensive, uncertain and can be stressful.

While you have a right to a lease extension and your freeholder can’t say no, they can frustrate the process, and this can lead to unexpected costs for you.

Our advice would be that if you can find a flat to buy with a long lease, do that instead!

Frequently Asked Questions

With thanks to the lease extension valuation experts at Homehold for helping to produce this guide.