April 17, 2024 2:52 pm

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Nikka Sulton

Selling a short lease property, typically with less than 70 to 80 years left, can pose challenges. However, there are strategies to secure a sale at a fair price.


What is a property with a short lease?

If you reside in a leasehold property, be it a house or a flat, ownership of the building lies with someone else, known as the freeholder. As the leaseholder, you enter into an agreement with the freeholder, detailing the duration—typically 99 years—during which you have the legal right to occupy the property in exchange for paying ground rent.

Lease terms can vary, with some extending beyond 125 years. However, a lease is generally considered short if it has less than 70 years remaining. Some lenders now classify leases with less than 80 years left as short, impacting mortgage eligibility.


A leasehold property’s value

As the lease term diminishes, so does the value of a leasehold flat. Typically, a flat with 99 or more years on its lease would fetch a price similar to that of a freehold property.

However, as the lease term decreases, the property’s value diminishes accordingly. A flat with 70 or more years left might retain about 85% to 90% of its full value, while one with 50 years remaining could drop to around 70%.

When purchasing a leasehold property, it’s crucial to ensure that its value aligns accurately with the remaining lease term.


A right to extend

In response to the challenges posed by short lease properties, reforms were introduced in the early 1990s. The Leasehold Reform Housing & Urban Development Act 1993 granted leasehold property owners the legal right to request a lease extension, with certain conditions in place to prevent freeholders from refusing such requests.

Under this Act, leaseholders who have resided in a property for two years or more possess a statutory right to extend their lease by 90 years. However, the waiting period before being eligible to apply for an extension may not be ideal, particularly for properties with short leases.

In some cases, buyers of properties with short leases may request the current owners to serve a statutory notice for lease extension as a condition of purchase, provided the current owners have lived in the property for at least two years.



Potential problems with trying to sell a house or flat with a short lease

If you’re aiming to sell your property but it falls under the short lease category, expect challenges in finding buyers. Short lease properties are less appealing to potential purchasers due to their limited lease duration, a factor considered by organizations like the Leasehold Advisory Service.

Securing a mortgage for such properties poses hurdles, as lenders typically prefer leases to exceed the mortgage duration by 25 to 30 years or more. Consequently, the shorter the lease, the tougher it becomes to sell the property.


Suggested solutions for selling your home when it’s on a short lease

If you’re a short lease property owner looking to sell, don’t be deterred. Selling a short-term leasehold property is feasible, whether you’re relocating due to changes in housing needs, employment, or financial circumstances.

One approach to address selling hurdles is negotiating with the freeholder to extend the lease duration. Extending the lease renders it more attractive to buyers, potentially facilitating mortgage approvals. However, lease extension negotiations can incur significant costs.

Alternatively, you could explore the option of purchasing the freehold from the freeholder. While this route offers more control over the property, it often comes with a hefty price tag, especially for standalone houses.

A third avenue involves selling to a quick home buying company specializing in prompt cash purchases. These companies, often found online, provide swift transactions without charging fees. Ensure the company is reputable by checking membership with regulatory bodies like The Property Ombudsman, offering a speedy resolution to selling dilemmas.


What are the benefits of buying a short-lease flat?

Short-lease properties hold appeal for retirees and those without dependents, offering an affordable living option without concerns about property value preservation for future beneficiaries. Additionally, buy-to-let investors find short-lease properties attractive, leveraging rental income for substantial returns before relinquishing ownership to the freeholder at lease expiry.


What are the risks associated with buying a flat with a short lease?

The main drawback of purchasing a short-lease property lies in its resale difficulty. As the lease term diminishes, so does the property’s value, making it less appealing to potential buyers and lenders alike. Short leases often stem from owners unable to afford lease extensions, commonly found in less affluent areas, or due to significant property repair needs.

Additionally, buyers should factor in maintenance and ground rent expenses stipulated in the lease agreement. These costs can be substantial, even if the intention is to let the property deteriorate until the lease expiration, potentially resulting in additional financial burdens.


FAQs about trying to sell a short lease house or flat

You might have concerns about selling your short lease home, and if so we hope these frequently asked questions, and our answers to them, will help you:


Will it be impossible to sell a short lease home?

While securing a buyer with a mortgage for a short lease property may pose challenges, selling options still exist. Consider avenues like extending the lease before selling or opting for a quick property buyer.


Why don’t mortgage lenders like short lease properties?

Lenders typically prefer leasehold properties with over 25 to 30 years remaining after the mortgage term. Short leases may not meet these criteria, making them less attractive to potential buyers.


Will it cost me money to sell my home?

Selling a property with a short lease doesn’t always require hefty expenses. While options like lease extension can be costly, selling to a quick home buyer entails no fees, ensuring you retain all the sale proceeds.





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