How long is long enough for a leasehold property?

For many people, particularly those in commuter-belt locations around cities such as London, Birmingham or Manchester, a flat is a great way to start on the property ladder.

When purchasing a flat, a solicitor will cover lots of terms, conditions and caveats relating to issues such as service charges, ground rent and lease. For many who don’t make a habit of regularly buying properties, they may overlook the importance of the length of the lease in particular.  

The same lease is passed on every time the flat is sold, so the length of the lease keeps reducing over time. Most mortgage companies will only lend on a lease that has more than 80 years remaining, therefore this has the potential to impact upon future plans to either remortgage or sell the flat in question. Leases can be extended, but there will be a cost involved, payable to the landlord. Specialist valuation and legal advice should always be sought before embarking on this process.

We recently worked with a client who was facing just this situation. They owned a flat and the time had come to remortgage. Their remaining lease term was 82 years – which sounds like a long time – but their preferred mortgage lender required the lease to have over 85 years left. In this case, the cost associated with extending the lease was in excess of £4,000 plus another £2,500 in legal fees and valuation. Despite this, our client took the decision to extend the lease so that they could benefit from better refinancing options both now and in the future and to ensure that their property was more marketable should they choose to sell further down the line. Had they let the lease drop below 80 years, this would have significantly impacted their refinancing options.

As you can see, when buying a leasehold property it is crucial to know exactly how long is left on the lease and to be aware of the financial implications when the remaining lease is approaching 80 years. Question your solicitor and understand the process – their knowledge will prove to be invaluable.

Further information:

The Leasehold Advisory Service: https://www.lease-advice.org/