Sell flat with short lease guide

Selling a leasehold flat already has the added complication of getting the freeholders’ cooperation, and any information or indeed approval, you may need from them – but a flat with a short lease can be even more challenging. This is because mortgage providers tend to be reluctant to lend money to buyers eyeing up short leases, which limits the pool of potential buyers. This leaves sellers with two options: pay to have the lease extended, or sell to a cash buyer. 

What is a leasehold property?

A lease gives you the right to occupy and use a property for a specified period. While you do “own” the property, you don’t own it indefinitely, like you would with a freehold property. The lease has an expiry date, and the remaining term gets shorter every year.

What is a short lease?

There’s no single legal definition of exactly how short a short lease is, but it’s generally accepted that a lease with around 80 or fewer years remaining is considered “short”. Some mortgage lenders may have concerns about leases considerably longer than this, too, depending on their lending criteria.

The length of the lease is important because the property generally becomes less valuable as the remaining term gets less and less. The value of a leasehold property will gradually and continually drop as the lease nears its end, but it is possible to extend a lease. This will protect the overall property value and make it easier to sell or remortgage.

Why is a short lease bad for sellers?

The main problem with a short lease is that it can make your flat less attractive to buyers.

Someone buying a flat with, for example, 60 or 70 years remaining on the lease, knows that they will probably, at some point, need to pay for a lease extension. This is an additional expense and complication they may prefer to avoid, so it can put off buyers even showing interest in your flat.

Then there are the mortgage problems – as mentioned, lenders have their own criteria around lease length, and many of them won’t provide a mortgage on a short lease. If a buyer can’t get a mortgage on a property because of the lease, they probably won’t be able to proceed with the purchase. 

Managing Director of House Buyer Bureau, Chris Hodgkinson, commented:

“One of the biggest misconceptions is that a short lease only affects the value of your flat. In reality, it can affect whether you’re able to sell it at all.

We regularly hear from homeowners who only discover their lease has become a problem once they put their property on the market. Buyers struggle to secure a mortgage, sales fall through and what should have been a straightforward move becomes a lengthy and frustrating process.”

There is another important consideration once the lease reaches 80 years or fewer. Under the current statutory lease-extension system, marriage value can form part of the premium paid to extend the lease. In short, marriage value means 50% of any profit earned from the sale of the flat with an extended lease, compared to if the flat had been sold without extending the lease, would need to be paid directly to the freeholder. This can add an extra cost to an already expensive process.

It’s worth noting that leasehold law is currently undergoing change – the Leasehold and Freehold Reform Act 2024 makes it easier for leaseholders, but not all provisions are in force yet. 

If you’re thinking about selling your leasehold flat, the first thing you should do is check exactly how many years are left on your lease. While you’re at it, you should also check the ground rent, as this can affect both the cost of extending the lease and how appealing the property may be to prospective buyers.

How much does a short lease devalue a property?

There’s no fixed percentage by which a short lease devalues a flat. The impact depends on a range of factors, including the number of years left, the property’s location and value, ground rent, local demand, and the cost of extending the lease.

Generally, the shorter the lease becomes, the greater the “expected” discount, compared with an equivalent flat with a long lease. A flat with 75 years remaining, for instance, may be worth considerably more than the same flat with 50 years remaining, but the same flat with 125 years will be worth more than either. This is partly because a buyer needs to factor the cost and inconvenience of extending the lease into what they are prepared to pay.

A professional valuation is the best way to know how much your particular flat may be worth. 

How much does a lease extension cost?

Again, there’s no standard price. The premium for extending a lease depends on the value of the flat, the number of years remaining and the ground rent.

Under the current statutory process for flats, a qualifying leaseholder can generally add 90 years to the existing term and reduce the ground rent to a peppercorn. If there are 80 or fewer years remaining when the formal notice is served, marriage value may also be payable.

You also need to budget for valuation and legal fees (including your freeholders’ solicitor’s legal fees).

A leasehold extension typically takes 6-12 months to complete, so if you need to sell soon, you might want to take professional advice before deciding whether extending the lease is worth it. Depending on your circumstances, selling the flat with its existing lease to a cash buyer may be the quicker and more cost-effective option.

Can you sell a flat with a short lease?

Yes, you can still sell a flat with a short lease, it just may be more difficult or slow. A short lease doesn’t stop you from selling your flat.

The challenge is finding a buyer who’s comfortable with the remaining term and any associated costs of them potentially extending the lease further down the line. Some buyers may be prepared to purchase the property at a reduced price and deal with the lease extension themselves.

You should be upfront about the remaining lease term from the outset, letting your estate agent (if you’re using one) know when you are discussing the listing. This will avoid wasted time for both yourself and any potential buyers later on.

If you do go down the traditional estate agency route, you may need to prepare for a longer process: a buyer may have to arrange specialist advice, negotiate the price around the lease and, most importantly, find out whether their mortgage lender is willing to lend on the property.

For someone who wants to move quickly, these additional hurdles can be frustrating.

How to sell a flat with a short lease fast

If speed is your priority, there are a few ways you can smooth some of the friction from the process:

1. Find out exactly how long is left on the lease. 
2. Get a realistic valuation. 
3. Consider whether a lease extension is worthwhile. 
4. Be transparent with potential buyers. 

Alternatively, consider a cash buyer, such as House Buyer Bureau. A cash purchase completely removes the need for a mortgage application, which means you can sell your flat with a short lease without having to worry about passing mortgage lenders’ stringent criteria. As a cash buyer, we are very accustomed to dealing with leasehold properties.

The right option depends on your circumstances. If you have plenty of time, extending the lease before selling may be worth considering, but if you just want a quick sale and to move on with your life, selling the flat as it stands may make more sense.

Sell your flat fast with House Buyer Bureau

If your flat has a short lease and you’d rather avoid a lengthy traditional sale, House Buyer Bureau can help.

As a specialist cash house buyer, we consider properties with all sorts of issues that may make a conventional sale more difficult, including short leases. Instead of waiting for a buyer to secure a mortgage and navigate the usual chain of transactions, you can get a cash offer and choose whether you want to proceed.