Buying a Short Lease Property
One of the most important things to check when buying a leasehold property is the number of years left on it. When you buy the leasehold, you buy the lease with the remaining years left.
A short lease is defined as having 80 years or less remaining on its term and whilst that is probably going to be longer than you live, it is an issue for you if you need a mortgage, or want to sell the lease in the future.
Most mortgage lenders won't lend on a property with 80 years or less on the lease, so buyers must negotiate with the seller to extend the lease if they want to buy the property. However, who pays to extend the lease? How long does this take? Can you extend yourself after completion? Don't the new changes in the law change the process? This guide helps you understand these challenges and the actions you can take.
What is considered a short lease?
In England and Wales, a short lease is defined as any lease term with 80 years or under. The reason is that the lease extension costs increase the shorter the lease gets. This is primarily linked to the marriage value, which the leaseholder pays to the freeholder and goes up each year the lease term goes down.
Marriage value was abolished when the Leasehold and Freehold Reform Act 2024 was passed on the 24th May 2024; however, to date, there has yet to be legislation on the change, and as such, lease extensions still have marriage values.
How to buy a short-lease flat in 2025
There are 3 options when buying a leasehold with a short lease, but some options aren't available to some buyers or are becoming obsolete, and we explain why.
Option 1: The seller extends the lease before completion
This is the best solution for the buyer because they buy a leasehold that has already been extended and won't encounter any challenges from their mortgage lender. The process:
- (if applicable) Seller obtains a lease extension valuation to confirm the premium to the freeholder.
- Seller serves a Section 42 Notice on the Freeholder.
- Seller and Freeholder negotiate the premium.
- Seller and Freeholder draft the deed of variation to change the lease term, adding additional years.
- Seller registers deed of variation at the Land Registry.
Whilst this is the best option for you as the buyer, it will delay the conveyancing process by 3 to 6 months (or more) as freeholders are notoriously slow and negotiations may not be simple; especially if the seller didn't obtain a Lease Extension Valuation and guess the value of the premium in their offer.
In this option, you'll pay the full market price for the property if the seller pays the premium to the freeholder. You'll only pay under full price if the seller asks you to contribute toward the costs.
Option 2: The Seller passes on the rights to extend to you
Since the 31st January 2025, the 2-year rule has been removed, allowing buyers to extend their lease from day 1 after they move in. This option is obsolete, other than to:
- Speed up the process by the seller serving the Section 42-Notice to start the 2-month clock for the freeholder to respond.
- (if freeholder responds before completion) You'll know the freeholder isn't absent and the premium they expect to extend the lease so that you can negotiate.
This option is only available to buyers whose mortgage lenders are happy to complete with the length of the lease (see Option 3).
Option 3: You buy the leasehold and extend yourself
As stated above, you can extend the property without waiting 2 years. However, you can only do this if your mortgage lender agrees to lend based on the length of the lease. As most mortgage lenders refuse to lend on a lease with close to 80 years left to run (read more on why below), you'll most likely opt for Option 1.
Are you paying the right price? If you plan on buying the property and extending yourself, are you sure your offer to the seller factors in all the lease extension costs? For example, on a property worth £250,000 with a long lease, you could end up paying £240,000 to the seller and £20,000 in premium/costs, which is £10,000 over.
This is why you must obtain a Lease Extension Valuation to confirm the premium and help you adjust your offer to the seller. We offer these with our RICS surveyors so Call or email for a quote on 0333 344 3234 (local call charges apply) / help@samconveyancing.co.uk.
What is Marriage Value?
The reason the 80-year threshold is so important is primarily due to marriage value. Under the statutory lease extension process, when a lease falls below 80 years, an additional sum called marriage value becomes payable to the freeholder. This is essentially the increase in the property's value that is 'unlocked' by merging the freehold and leasehold interests via a longer lease. The shorter the remaining lease drops below 80 years, the higher the marriage value, making the cost of extending the lease significantly more expensive.
so...what is Reversion?
Reversion is the legal term for the point at which the lease expires, and ownership of the property, including any buildings on it, legally reverts back to the freeholder.
Without a lease extension, your right to occupy the property ends when the lease term reaches zero. This is the ultimate consequence of having a short lease and highlights the critical need to address the lease length before it expires.
Why won't mortgage lenders lend on a short lease?
As leasehold properties devalue each year, this exposes mortgage lenders to the risk of the property becoming worthless and their mortgage not being repaid. This is an extreme circumstance. However, mortgage lenders want to be repaid, so why take any risk?
To protect against this risk, mortgage lenders have a rule not to lend on leaseholds that have 80 years or less. This isn't across all mortgage lenders, and some will allow lower, while some refuse higher.
The Leasehold and Freehold Reform Act 2024 was passed on the 24th May 2024, but is not fully enforced yet and the date for this is not yet clear. We will update our content as and when the finalised legislation is published. Read more - Expected changes
Is it worth buying a property with a Short Lease?
A short lease is worth buying as long as you have agreed with the seller:
- How will the lease be extended? Is the extension using the Formal or Informal process with the freeholder? Will the extension be completed before or after completion?
- Who is paying for it? Is the seller offering under the market price for you to pay the extension costs or are you paying the full asking price and they pay for the costs?
First-time buyers are often drawn toward a short-lease property because of the lower sale price, so paying close attention to the process and cost for extending the lease are crucial.
Disadvantages of a Short Lease Property
High Lease Extension Costs
- Extending a short lease can be expensive. The cost, known as the premium, increases significantly as the lease term drops below 80 years due to the payable 'marriage value'.
- This is the increase in the property's value once the lease is extended. The shorter the lease, the higher the marriage value and thus the premium.
- You will also have to pay your own legal and valuation fees, as well as the freeholder's reasonable costs.
- These lease extension costs can easily run into tens of thousands of pounds for very short leases, potentially making the overall purchase and extension unaffordable.
Ground Rent Increases
- When you buy a leasehold property, you inherit the seller's obligation to pay the annual ground rent to the freeholder.
- While some older leases have low, fixed ground rents, newer leases (and sometimes older ones with review clauses) can have ground rents that are very high or contain clauses for aggressive, unpredictable increases.
- These ground rent terms can make it difficult to get a mortgage and significantly reduce the property's appeal and value, in addition to the impact of the short term itself.
- A statutory lease extension for a flat reduces the ground rent to a peppercorn (effectively zero) for the duration of the extended term, you are still bound by the existing ground rent terms until the extension is complete.
What happens if I'm buying a short lease property but the Freeholder is absent?
If the freeholder is missing, cannot be found, or is unresponsive, you cannot simply serve the Section 42 Notice. Instead, you must apply to the County Court for a Vesting Order.
This is a court order that allows the lease extension to proceed without the freeholder's direct involvement, with the court effectively stepping in to grant the new lease.
Obtaining a Vesting Order adds extra time, legal complexity, and cost compared to a standard lease extension with a present freeholder.
It requires court applications and often investigations to demonstrate that the freeholder is genuinely absent. It's possible, but it's a much more involved undertaking.
If you are buying a property with a short lease and discover the freeholder is absent, it is critical to seek legal advice from a solicitor experienced in both lease extensions and absent freeholder cases. They can guide you through the required court process.
Determine Who Pays for the Lease Extension
Lease extensions involve several costs: the premium (based on the valuation), your own legal and valuation fees, and the freeholder's reasonable legal and valuation fees. It is crucial to agree with the seller as early as possible who will be responsible for these.
If you are paying full market value as if the property had a long lease, the seller should typically cover them. If you are buying at a discount due to the short lease, you will likely cover them yourself. Clarity here avoids disputes.
Note that under the statutory process, while you generally pay the freeholder's reasonable costs, your own costs (legal and valuation) are not recoverable from the freeholder, regardless of the outcome. This is a key factor when considering your budget.
Instruct a Specialist Lease Extension Solicitor
You'll need a solicitor who specialises in leasehold property and lease extensions, not just general conveyancing.
They will check your eligibility, review the lease and title documents, advise on the best strategy for the extension in your circumstances, handle the formal notice procedure (if applicable), liaise with the freeholder's solicitors and your valuer, and manage the legal process of the extension concurrently with your purchase conveyancing.
Their expertise is invaluable in ensuring the process is handled correctly and efficiently.
How to confirm the number of years left on your lease
You must download a copy of the Land Registry Office Copy (deed) for your leasehold property. Section A will state when your lease was granted, for example, "the lease was granted for 99 years from 1970".
A common misunderstanding is to think "99 years from 1970" means there are still 99 years remaining today. However, you need to calculate the time since the lease was granted.
Using the example of a 99-year lease from 1970: by 2025, 55 years have passed (2025 - 1970 = 55), leaving 44 years remaining. This is well below the 80-year short lease threshold.
- RICS Valuers for the lease premium.
- Handling of the Section 42 Notice.
- Negotiations.
- The full Lease Extension process.
- Tribunal cases.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
