Thinking of making the plunge into flat ownership, whether to use it as a home or as a buy-to-let investment? Flats, which include apartments and maisonettes, are usually sold as leaseholds – and the length of the remaining lease has a big impact on the value of the property. So the price of a flat with a very short lease could well be attractive. But before you go ahead and buy a short-lease flat, be sure to do your homework to fully understand the legal and financial consequences.
What is a Short Lease?
Leases for flats are usually long-term. The majority of the leases for these types of properties are granted for 999 years, 99 years or 125 years. A lease with less than 70/80 years left may be regarded as a short lease. Although being considered as a short lease does not make the flat un-mortgageable or impossible to sell, it is worth considering extending the lease if you are planning on keeping the flat for a long time or want to sell the flat in the future.
Some flats are granted leases for as little as 5 years or 10 years. These types of leases can still be given though for finance although it may not be possible if you don’t own the freehold interest then you won’t help the reversion that you may leave for your beneficiary or future buyer.
The Law Commission is currently considering the legal aspects of some of the leases for properties though they have been granted for a hundred years or more than the reversion the complimentary interest may not pay anybody to buy the reversion after the lease has been built.
Consequently, as demonstrated before, a leasehold asset instantly implies that without the extension or the clause in the lease, you are an owner of a depreciating asset. At the end of the lease, unless extended in time, the property reverts to the freeholder.
How to Extend a Lease in Wimbledon London?
The good news is leaseholders do have the right to increase their lease by 90 years under the Leasehold Reform, Housing and Urban Development Act 1993. A lease extension under the 1993 Act gives the leaseholder the right to an additional 90 years on top of their remaining term at a peppercorn ground rent.
Letting a Lease Expire
If the leaseholder wants to try going down the informal route and doesn’t want to wait 2 years, then any agreement you reach between yourselves is likely to be perfectly valid in law, but it won’t have statutory protection.
Lease extensions are not always the way to go when there is no long lease left to be extended. Short-lease flats can be a very attractive option for those who are downsizing or don’t need to leave an estate, such as retiring people and buyers of second homes.
How to Mortgage a Short-Lease Flat in Wimbledon London?
You may struggle to secure a mortgage on a flat with a short lease. The years remaining on a lease or the ‘minimum expired lease term’, the shortest term acknowledged will depend on the mortgage company. The majority of lenders though will consider a short lease to be anything under 75-85 years, A 65-year lease is likely to be the lowest term a mortgage lender will consider but be aware – “although leasehold flats are the most common reason for purchasing a lease extension, finding a mortgage lender for a 65-year lease is extremely rare,” warns one mortgage expert.
What to do with Short Lease Property in Wimbledon London?
Flat leases for short periods are usually auctioned instead of being sold in traditional estate agencies. Firstly the auction buys can be very cheap as you might have guessed, if you can pay with cash. This can make the property a good investment too.
