How does a short lease affect the sale of my flat?

Last updated: July 2023 | 5 min read

Did you know that owning a leasehold property that has a short remaining term on its lease can pose challenges when it comes to selling?

Leasehold properties with less than 80 years remaining can be viewed as high-risk investments by both cash buyers and mortgage lenders.

However, there are options available to extend the lease on your property, either through the statutory or informal route.

In this article, we will explore the pros and cons of both options, as well as provide guidance on the extension process, the costs involved, and the potential challenges.

Whether you're currently looking to extend your lease, or considering purchasing a property with a short lease, this article will provide valuable information to help you make informed decisions and navigate the legal process with confidence.

Keep reading to find out more about how a short lease can affect the sale of your flat and what you can do about it.

Origins and evolution of leasehold properties

The origins of leasehold properties can be traced back to medieval times when land ownership in the UK was based on a feudal system.

The introduction of the Statute of Quia Emptores in 1290 allowed for the free sale of land, rather than relying solely on the grant of land from the Crown. Landowners could now lease their land to others, creating a new class of tenants with leasehold interests.

The Industrial Revolution brought further significant changes. As urbanisation increased, land became more valuable, and landowners sought ways to retain control over it while generating income. Long-term leases became widely adopted, often spanning 99 or 999 years. The leaseholders would build and maintain properties on the leased land, paying ground rent to the landowner.

What is a short lease?

A short lease is one where the remaining lease term (the number of years before the lease ends) is short. Most surveyors and lenders consider a lease with fewer than 80 years remaining as short.

Why are short leases a problem?

The main issue for leasehold properties that have short leases is that as the remaining length of the lease falls, the value of the property continues to fall over time. The property becomes difficult to borrow against, and so becomes difficult to remortgage or sell.

Additionally, ground rents may increase and there may be a higher cost to extend the lease.

Read about what happens when a lease expires.

Key laws governing leasehold properties and lease extensions

Over the years, several key laws and regulations have been introduced to address the issues faced by leaseholders, such as unfair lease terms, escalating ground rent and difficulties in extending leases.

The Leasehold Reform Act of 1967 granted leaseholders the right to purchase the freehold of their property, also known as enfranchisement. This legislation was later amended by the Leasehold Reform, Housing and Urban Development Act 1993, which provides most leasehold flat owners with the right to extend their lease by 90 years.

The Commonhold and Leasehold Reform Act 2002 introduced commonhold tenure as an alternative to leasehold, and reformed leasehold law, making it easier for leaseholders to exercise their rights, such as extending their lease or buying the freehold.

The Urban Development Act of 1989 established Urban Development Corporations to promote development in urban areas, including leasehold properties. This legislation also introduced measures to protect leaseholders from excessive rent charges.

Other laws and regulations governing leasehold properties include the Landlord and Tenant Act 1987 and the Leasehold Property (Repairs) Act 1938.

Implications of short leases

Selling a property that has a short lease can be challenging. Buyers may be hesitant to purchase due to the risks involved.

How a short lease impacts property value

A short lease significantly reduces the full market value of a property. As the remaining term decreases, the property's value decreases too. This phenomenon, known as 'marriage value', is the difference between the value of the property with its short lease and its value with a longer lease.

Calculating marriage value and lease extension costs

Marriage value and lease extension costs are influenced by the unexpired lease term, ground rent, and property value.

By law, when the lease is extended, the landlord is entitled to 50% of the marriage value. This is known as the 'marriage fee'.

However, the marriage fee only needs to be paid when the lease has less than 80 years remaining. So, if you're planning to extend your lease, it's worth doing so before the unexpired term falls below 80 years.

To calculate the marriage value, a chartered surveyor will consider the existing lease's value and compare it to the estimated value of the property after extending the lease.

Ground rent also plays a part in extension costs. This is the annual payment made by the leaseholder to the freeholder. When extending a lease, the ground rent can be reduced to a 'peppercorn rent', which effectively means none is payable.

The landlord will typically factor in the loss of future ground rent payments when negotiating the extension premium.

Lastly, the overall property value is a significant factor in determining the cost of an lease extension. Generally, the higher the property value, the more expensive the extension will be. The premium is also influenced by the remaining lease term – the shorter the lease, the more expensive it will be to extend.

Lenders' reluctance to finance properties with short remaining leases

Mortgage lenders are often hesitant to finance short lease properties due to the higher risk associated with them. Most mortgage providers require a lease term of at least 70-80 years remaining at the time of application.

As the lease gets shorter, it becomes increasingly difficult to secure a mortgage for buying the flat.

Difficulty in finding cash buyers

Finding a cash buyer for a short lease property can be challenging. Cash buyers tend to be more cautious and may be deterred by the risks and costs associated with extending the lease.

Consequently, sellers may have to lower their asking price to attract potential buyers.

Determining the remaining lease term

It's crucial to know the remaining term of your lease before selling your property.

To determine the remaining term of your property's lease, start by looking at your lease agreement. This should state the original lease term and the commencement date. Subtract the number of years that have passed since the lease began from the original lease term to calculate the remaining term.

Using conveyancers

Conveyancing solicitors can provide legal advice, negotiate with the freeholder, prepare the necessary documents, and ensure that the lease extension is correctly registered with the Land Registry.

You can extend the lease yourself. But it can be a lot of work.

When selecting a conveyancer to work for you, look for a professional with specific experience in leasehold property matters. Research their reputation, ask for recommendations, and request a free initial consultation to discuss your specific needs and assess their expertise.

Options for selling a flat with a short lease

Option 1: sell without extending

You can sell your flat without extending the lease, but be prepared for a lower sale price and a potentially smaller pool of prospective buyers.

An estate agent can help market the property to cash buyers or those willing to take on the risks of a short term. You also might be able to sell through an auction house if you want to sell your property quickly.

Option 2: Extend the lease informally

An informal lease extension, also known as a non-statutory or private lease extension, involves negotiating directly with the freeholder to agree on the terms of the lease extension without following the statutory process.

Advantages of informal lease extensions

  • Quicker process: Informal extensions can often be completed more quickly than statutory extensions, as they don't involve serving formal notices or adhering to strict timelines.
  • Lower costs: you may pay lower legal and professional fees, as informal extensions typically involve less paperwork and can bypass some of the costs associated with the statutory process.
  • Flexible terms: both parties can negotiate the terms of the new lease, including the length of the extension, ground rent, and other conditions. This flexibility can be advantageous if both parties can reach a mutually beneficial agreement.

Disadvantages of informal extensions

  • Less protection: As the leaseholder, you won't have the same legal protection as if you followed the statutory route. Freeholders may attempt to include onerous terms in the new lease, such as increasing ground rent or imposing additional charges.
  • Uncertain outcomes: Success relies on the willingness of the freeholder to negotiate and agree on the terms. If the freeholder is uncooperative, the process could result in less favourable terms for the leaseholder.
  • Future difficulties: A poorly negotiated extension could lead to difficulties in selling the property in the future, as a potential buyer may be deterred by unfavourable lease terms or an inadequate extension period.

Option 3: Extend the lease formally

A formal lease extension, also known as a statutory lease extension, offers the most protection and guarantees a 90-year extension on top of the existing lease term. This process involves serving a Section 42 notice to the freeholder. Provided you meet specific criteria, such as owning the property for at least two years, you have a statutory right to do this.

You may like to read further on how to extend a lease formally and informally.

Option 4: Selling with the benefit of assignment of the notice

If you have served a Section 42 notice but haven't completed the process, you can sell your property with the benefit of assignment of the notice. Through terms in the sale contract. the new buyer can take over the process where you leave off.

Considerations for buying a property with a short lease

Before buying a short lease property, carefully consider the risks and benefits. While you might secure a lower purchase price, be prepared for the costs and complexities of extending the lease. Ensure you have a clear understanding of the lease extension process and the associated costs, and consult a conveyancing solicitor for expert advice.

The Leasehold Advisory Service is a government-funded organisation that provides free advice and support for leaseholders, including those considering purchasing a short lease property. They offer guidance on lease extensions, buying the freehold, and understanding your rights and responsibilities as a leaseholder.

Buying the freehold of a property can provide you with greater control over your property and eliminate ground rent payments. However, purchasing the freehold can be expensive and may involve complex legal processes.


Most banks and building societies have strict criteria for short lease properties. Common mortgage types, such as repayment, interest-only, and fixed-rate mortgages, typically require a minimum remaining term of 70-80 years.

Some lenders may offer specialised mortgages for short lease properties, but these often come with higher interest rates and more stringent requirements.

To secure a mortgage, you may need to extend the lease or find a specialist lender. Consult a mortgage broker or financial adviser for guidance on finding a suitable mortgage product.

In conclusion: you have options

Selling or buying a flat with a short lease can be challenging, but understanding the implications, legal framework, and available options can help you navigate the process more effectively.

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