Buying or selling a flat with a short lease?

Posted 05/01/2017

So you have decided to sell your property, or have found the flat you have always wanted but there is a short lease term.... 

Leases with under 85 years still remaining are a warning sign to would be buyers. This is because at the 80 year mark Marriage Fees are payable on top of all of the other costs and charges.

The Marriage Fee or Marriage Value means that at the 80 year threshold the Landlord is entitled to half of the increase in the value of the property that arises as a result of the extended term. The term arrives from the total value of the property + the longer lease, when married together, exceed the total value of the separate parts. The fee is an estimated value and will form part of the Premium or the offer made to the landlord to purchase the new lease term.


So, what are the options when looking to purchase a property with a short lease?


Before making a formal offer, you can: 

  1. Ask if the Seller is willing to undertake the lease extension simultaneous with the sale to you. The seller will retain all of the risk and the associated costs. This may result in a higher asking price though. It is the most risk free option, but could cause delays to your purchase.
  2. You can request the Seller make an application to the landlord by serving a formal Notice. The Seller can then transfer, or assign, the benefit of the lease extension to you so that you deal directly with the Freehold and your purchase is not delayed. It would be very important that all costs were known so that they could be factored into the purchase price negotiations or the risk is that you could have to provide any shortfall. 
  3. You can proceed to purchase the property with the lease as it is. You could agree a reduced price to reflect the short term, but you would not be able to extend the lease under the formal rules until you had owned the property for 2 years. You can always make an informal request though at any time. There is no guarantee it would be agreed of course and the short term may not be acceptable to mortgage lenders so you would need to look at the lender requirements first.


So, what are the options when looking to sell a property with a short lease? 

There are 2 options, but being organised and perhaps looking into extending 6months before you hope to sell to allow you to consider all of the options: 

  1. Make a formal application to the Landlord under the Leasehold Reform Housing and Urban Development Act 1993. This will reduce the ground rent to £0 and add 90 years to the existing term. This involves serving a S42. Notice, however there is quite a lot of preparation that must be done before to ensure it is done correctly. A faulty notice can cause significant delays and should be prepared and served by a Property Law specialist. 
  2. Make an informal application to the landlord. This is a much quicker method and you should request no less than 125 years. There are no notices, no statutory time periods but the premium will be a matter of negotiation rather than a prescribed formula. If for any reason the landlord is failing to reply, being slow or otherwise inflexible revert to option 1 to avoid wasting any more time.

Whether you are buying or selling a property with a short lease it is most important that you seek specialist, prompt advice from a lawyer. If you are selling consider your options well in advance of a sale.


Get free initial advice on lease extensions

Call Holmes & Hills Solicitors on 01376 320456 and speak with Keeley Livingstone, Holmes & Hills’ lease extension specialist.

Keeley will give you initial guidance on the procedure, time scales and costs involve in extending a lease. Keeley will also answer any questions you may have so that you can make an informed decision on the sale, purchase and lease extension.


Keeley Livingstone

Posted 05/01/2017 by:
Keeley Livingstone
Partner and Head of Residential Property Team

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