You’ve found a flat you love. It’s bright, it’s airy, it’s close to your friends and that kitchen!
But there is a snag. The estate agent has let slip that the flat has a short lease, with 90 years or fewer remaining.
Making a decision
Just because a flat has a short lease doesn’t mean you shouldn’t buy it. But you must negotiate a discount that’s big enough to cover the cost of a lease extension.
Here are some tips to consider.
Ask the current owner to start the Lease Extension
Once you’ve owned a flat for two years you are eligible to extend its lease. So as long as the current owner has had the property for this time, they can get this process started.
In an ideal world you’d get them to start and finish the lease extension before you buy the flat. However, this can take a year.
A good alternative is to get the current owner to start the lease extension process. They can then 'assign' it to you, the new owner, when the sale goes through.
The upside is that you won’t have to wait two years before you can start the process. This is particularly important if the flat has fewer than 83 years remaining. (Remind your self why here)
The downside is that you’ll be responsible for negotiating the cost of the extension and you’ll need to have the money ready to pay for it.
Negotiate a discount on the sale price.
A flat with a short lease is worth less than a flat with a long lease. This is because a buyer knows they’ll need to find the money to do a lease extension.
You need to negotiate a discount that’s big enough to cover the cost of the extension. If you’re not sure what the process will cost, get in touch with us. We can give you an estimate free of charge.
If you know how much a similar flat with a long lease would sell for, and you know the cost of extending the lease, then you can work out how much you should pay for a short lease flat.
Don’t go informal
In order to speed up the process of getting a lease extension, often the current owner of the property will contact the freeholder directly.
The problem with these informal lease extensions is that you can actually end up in a worse position than if you’d kept the short lease! Don’t do it! Read more about the pitfalls of the informal route.
Consider walking away
If you buy a flat with a short lease is almost certainly going to require you to extend your lease now or in the near future.
By buying a short-lease flat you’re signing up for:
- extra admin and a year-long process
- some uncertainty – you can’t tell exactly how much a lease extension will cost until you’ve finished it.
- a big bill. And the challenge of how to pay it. You’ll either need to hold back some money from your deposit or come up with a plan for how to pay for it later. See our guidance on financing a lease extension.
If you can find a flat you like with a long lease, you might well think that is a better option.