DIRECTOR OF ESTATE AGENT DOUGLAS & GORDON
Q.We’ve been offered a flat but the lease is less than 80 years. Should we avoid buying a short lease?
A.The explosion in flat conversions sold off on 99-year leases in the 1980s has meant many of these flats now have leases approaching or below 80 years. In London, it is common to buy a lease under 50 years, some are even low as 11 years. The advantage of a short lease is that they are much cheaper. For example, an 80-year lease is worth around 80 per cent of the freehold value.
Since 1993 the law has allowed owners of such leases to buy 90-year extensions subject to having owned the lease for at least two years. The methodology is somewhat esoteric since the original law was subject to the approval of the House of Lords who owned around 90 per cent of the UK’s land at the time. Nowadays, a 90-year extension is relatively easy to buy.
The only real issue you face buying a short lease is that a lot of mortgage companies won’t lend on a sub 80-year lease. But fear not, some brokers will. From my perspective, taking the discount available on properties with a short lease can be a great idea if you have something else you’d rather spend money on (school fees for example). You can then extend the lease in the future when you have more money, using the extra cash now where you need it most.
One last thing, if you have a lease of just over 80 years, it’s worth extending it now as the cost goes up substantially when it dips below 80. Look online for advice and make sure you appoint an expert surveyor.