What is a short lease and what can I do if I have one?
What is a lease?
When you buy certain types of property such as flats and apartments you will often be buying a lease rather than the freehold land.
Leases are granted for a specified period. At the end of that period the lease expires and the property passes to the freeholder automatically.
It is therefore very important to consider the lengthy any lease you are buying, and in particular the length of time that is remaining.
Many leases in the UK are granted for a period of 999 years. This means that even if the lease was initially granted many years ago, the length of time remaining will be more than adequate.
However, some leases are granted with an initial period of as little as 99 years. Time on these leases can quickly tick away, so that when the property is later sold on the length of time remaining under the lease can be dangerously low.
What is a short lease?
Any lease with fewer that 80 years remaining under it is regarded as a ‘short lease’ by property professionals.
While most leasehold properties being marketed have leases with more than 80 years remaining this is not always the case and we see leases with less than 70 or occasionally less than 60 years remaining.
Short leases and mortgage lenders
Mortgage lenders are wary leases whose unexpired term is close to or below 85 years and will not lend on properties where the unexpired term fails to meet their minimum period.
Lenders have a different policies and will often assess it as at the date the mortgage is due to end. Leases with fewer than 75 to 85 years remaining will generally be unacceptable le to them.
When a short lease is un-mortgageable it can be very hard to find a buyer and they are often sold at a discount through auctions.
The right to extend a short lease
Owners do have a legal right to extend their lease if they have owned the property for two years or more.
However, the cost of extending a lease can be considerable. It is calculated by an independent surveyor and is based on various factors including the value of the property and the length of the unexpired part of the lease.
Our property team are experienced in dealing with short lease extensions and will be happy to provide an estimate of the likely legal costs of extending your lease.
Asking the seller to extend the short lease
Purchasers can ask the seller to extend their lease prior to completion, or alternatively serve notice on the landlord so that the purchaser does not have to wait for two years after moving in.
Claiming compensation for a short lease
Your conveyancing solicitor should alert you to the term of the lease you are buying.
If your solicitor did not warn you that you were buying a short lease then you may be entitled to seek compensation. We specialise in negligence claims and would be happy to provide you with a free case assessment and details of no win, no fee funding.