How to buy a property with a short lease
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1
Lease Extension on Completion
This is the preferred option for the buyer. By extending the lease on completion, it means that the seller passes title to you with a lease that has the new lease term added onto the lease.
Who should pay for the lease extension premium?
This depends. If the lease is short and you are paying under the market value of what the property would be worth with a long lease then you should pay the premium to extend the lease. If however, you are paying the current market price as if the property had a full lease then the seller should pay for the lease extension premium.
Pros
- The mortgage lender will make their decision to lend based on the extended lease term.
- You can agree with the seller that they cover the costs of the lease extension including the premium, solicitor's fees, surveyor fees and freeholder's fees (only normally achievable if your offer is for the current market value of the property with an extended lease, but not if the property is being sold as a short lease).
- The longer lease is registered on completion meaning less overall work for solicitors to do.
- You can use this as a bargaining tool to ensure everything gets completed at the same time which means that the seller is also going to push for the process to be as speedy as possible.
- You also have the option to pay the seller for the lease extension if you are paying below market price for the property.
Cons
- You are not in control of the process - only the seller can deal with the freeholder in extending the lease.
- Although the final lease and terms are agreed by your solicitor, only the seller is able to chase the freeholder: you are left waiting for others to carry out the tasks needed to complete the process.
- By completing the lease extension process on the day of completion you are going to extend the time it takes to complete the conveyancing from 2 to 6 months; sometimes even longer if the freeholder does not respond quickly.
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2
Seller serves Section 42 notice and buyer extends the lease after completion
If option 1 is going to take too long to complete then this is the next best option, although it comes with some dangers. By getting the seller to serve the Section 42 notice on the title ( read more about the Section 42 notice), this passes the statutory right to extend the lease to you after completion. You'll then need to agree the new lease term directly with the freeholder, although there is no guarantee the freeholder will agree to the notice and you may need to go as far as applying to the Leasehold Valuation Tribunal to rule on the value of the premium you'll have to pay to extend the lease (this is very costly and can take months to complete).
Who should pay for the lease extension premium?
This depends - and goes back to the scenario above. If the lease is short and you are paying under the market value of what the property would be worth with a long lease then you should pay the premium to extend the lease. If however, you are paying the current market price as if the property had a full lease then the seller should pay for the lease extension premium. In the latter example, the seller or buyer's solicitor would hold the lease extension premium amount as a retention until the freeholder agrees the final sum and then the retention is used to pay the lease extension premium. Be careful though to make sure the retention is large enough so as to cover the premium.
Pros
- You are in control of the final stage of the process of extending the lease.
- You can agree that the seller covers the costs of serving the Section 42 notice (only normally achievable if your offer is for the current market value of the property with an extended lease, not with a short lease).
- You can complete the purchase quicker.
- You pay the cost of the lease extension premium based on the date of the serving of the Section 42 notice.
- The lease extension premium is valued based on the property's value at the time of the seller serving the section 42 notice.
Cons
- Your mortgage lender may not agree to lend you the mortgage money (you should check with them about this).
- The longer lease isn't registered on completion and you will incur additional work with solicitors.
- You run the risk of drawn out negotiations with the freeholder relating to the lease and costs to extend.
- You pay all of the costs to extend the lease including solicitor fees and all the freeholder's fees.
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3
Buyer extends the lease after completion
This is only an option if your mortgage lender is happy to lend you the money based on the current lease term. The cost to extend will be more as you'll need to wait the statutory 2 years before you can start the formal lease extension process.
Pros
- You are in control of the final stage of extending the lease extension process.
- You can negotiate with the seller that they cover the costs of the Section 42 notice (only normally achievable if your offer is for the current market value of the property with an extended lease, not with a short lease).
- Your mortgage lender may not agree to lend you the mortgage money (check with your mortgage lender to find out if they will agree to this).
Cons
- The longer lease isn't registered on completion and you will have to pay for your solicitor carrying out additional work.
- You run the risk of drawn out negotiations with the freeholder with regards to the lease and costs to extend.
- The cost used to calculate the lease extension premium could be more if the property price has increased.
- You pay all of the costs to extend the lease including solicitor fees, surveyor fees and the freeholder's fees.
"The estate agent told me I had a 89 year lease, I now find out it is only 69 years - what do I do"
Finding out you have a shorter lease than what was sold to you can leave you feeling very upset - and you should be. By the time you find out the actual lease term of your property you most likely have already paid for your solicitor, mortgage valuation and property searches. If you paid for the full market value of this property on the basis it has a long lease, and now you find out you have a short lease, then you'll need to either:
- Negotiate down the sale price; or
- Agree the seller pays for the lease extension
Remember, if you are paying full market price for the property then you should have a long lease. As soon as you get a short lease then the property price goes down in value.
Here is an example email you can send to your estate agent if they have sold you a property that you find out has got a shorter lease than was advertised to you.
Hi AGENT NAME,
Re: PROPERTY ADDRESS
I’m not sure whether you’ve had time to review our previous email yet but I thought I’d give you a further update our end.
Things are progressing well for us with the conveyancing. My searches are back, mortgages is in-hand and enquiries are being finalised. This final point however has flagged up an issue with the lease term that we need your help with.
My solicitor has spotted that the lease term left to run is not the X years that I was told when I put my offer in, it is in fact X years.
I'm sure you'll appreciate that when paying the current asking price of the property, I need to ensure that the property doesn’t have a short lease.
The challenge for us all is that any buyer looking to buy this property will have an issue over the short lease and for some mortgage lenders they may not lend based on the remaining lease term.
We are very disappointed to have been informed that the lease term was X years by AGENT NAME when I put my offer. We put in an offer for the full market value of the property based on the lease being X years. On your statement I was buying a leasehold with X years I paid for a number of costs and if this matter doesn’t proceed, because of your error in the way the property was sold to us by AGENT NAME, we have been put at a financial loss to the sum of £X.
We are still very keen to buy the property and will be looking to exchange over the next few weeks, however we need to address the short lease by either:


We hope that this matter can be addressed with the seller as we have gotten so far through the process and are close to being ready to exchange. Sadly as all buyers are going to come up against this challenge with the short lease we see our solutions above as the best opportunity for this seller to overcome this short lease hurdle.
We look forward to hearing back from you before the end of this week so that we can all prepare to move forward quickly.
Kind regards,
The key thing to remember is that anyone buying the property will have to deal with the short lease. The challenge is if the seller didn't know they have a short lease and are left having to accept they have to pay for this to be extended or risk not being able to sell. For some sellers this may mean they are no longer in a financial position to be able to sell and will have to pull their property from the market.
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