Having a 999 year lease on a property can be a positive thing. It means you won’t have to worry about paying for the lease to be extended during the time you own the leasehold of the property. It can provide additional peace of mind that the property is yours and can be seen as similar to owning the freehold.
While there are advantages to your landlord or the freeholder providing you with a 999 year lease, there are still some negative elements to this. You will ultimately still be the leaseholder of the property. As a result, there are limitations with what your can do and your rights regarding the property.
In this article, we will discuss everything you need to know about this lease type and the advantages and disadvantages of this.
What is a 999 Year Lease?
A 999 year lease is the maximum length a leasehold property can have. It means you won’t have to worry about paying any lease extension costs when you purchase a property with this lease type. This can provide peace of mind to some buyers.
When buying a property or flat that is leasehold, it’s important to look at the lease length. The longer the lease the better because you won’t need to worry about extending it. Extending the lease can be costly, and ideally, a property should have over 80 years left on its lease contract.
You may find it more difficult to secure a mortgage on a property with a lease contract of less than 80 years. This is why a property 999 year lease is favoured. Typically, properties will have a lease of 99 or 125 years.
Difference Between a 999 Year Lease vs Freehold
There are some key differences between a 999 year lease and the freehold. While a 999 year lease provides security that you don’t have to extend the lease in your lifetime, ultimately you are still a leaseholder.
While you will own the property you have purchased as a leaseholder, you won’t own the land the property is on. As a result, there are limitations to what you can do. You will still need to pay for additional costs such as ground rent, property maintenance and service charges. This helps to maintain the building, and the grounds and covers any building insurance.
When you buy the freehold of a property, you will also own the land the building is on. This provides you with complete control over the property and takes away the limitations of being a leaseholder.
In addition to this, it means you don’t have to worry about any additional maintenance charges. Purchasing the freehold does come with extra responsibilities, but it also gives more reassurance.
999 year leases are given by some leaseholders to provide additional peace of mind. When they were first introduced, they were compared to buying the freehold. However, the fundamental differences are clear.
While it can deter some property owners from buying the freehold, it’s important to assess whether buying a leasehold vs freehold is the better option for you. There are pros and cons to both freehold and leasehold. This is why it’s useful to compare the costs and benefits for both.
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What are the Disadvantages of a 999 Year Lease?
There are several drawbacks to having a 999 year lease. These include:
Extending to a 999 Year Lease is Costly
Extending the lease of a property is important. It provides security for the leaseholder and also helps to prevent the property from becoming a financial burden. However, it is expensive. In general, the shorter the lease on a property is, the more costly it will be to extend. The property you purchase may not already have a 999 year lease. In this instance, you will need to pay for this type of lease extension.
On average, a standard lease extension costs can be between £7,000 - £10,000. However, this is dependent on the lease type and the market value of the property. It can cost up to £20,000 if your property doesn’t already have a 999 lease type when it was purchased. While a 999 year lease is costly to purchase, it does mean you won't have to worry about having to extend it again in your lifetime.
Not only will the leaseholder have to pay for the lease extension, but they will also have to cover the legal expenses and conveyancing fees. These additional costs include:
- Surveyor’s valuation: £600 - 900
- Solicitor fees: £600 - £1,200
- Surveyor negotiation costs: £150 - 200 (per hour)
- Freeholder valuation: £600 - £900
- Freeholder solicitor fees: £600 - £1,200
- Land Registry fees: £20 - 40
You will also need to take into consideration the cost of the lease premium with your freeholder. Extending the lease extends the length of time a person owns the property. As a result, it prolongs the time it will take for a freeholder to own their property again. This is why premiums are paid to the freeholder. While it’s beneficial to extend the lease, you will need to consider these hidden costs.
Additional Costs
When you own a leasehold property, you need to take into consideration the costs of not owning the property outright. You will likely pay the following:
- Ground rent
- Service charges
- Administration fees (when buying, selling or extending your lease)
- Building Insurance
Other charges may apply depending on your specific lease and contracts. The majority are regular charges you will be required to pay in addition to your mortgage and contents insurance.
You Won’t Own the Freehold
Extending your lease won’t provide you with ownership of the freehold. As explained, this will prevent you from having complete ownership of the property. You will be limited in some of the things you can do to the property.
In addition to this, you may need to seek written permission for some changes to be made. However, the Leasehold Reform Act 1967, was put in place to protect the rights of leaseholders. It’s regularly updated for the benefit of the leaseholder.
If you want to buy the freehold, granted that you meet the requirements, you can opt to do this. This provides additional security and ownership compared to having a 999 year lease. However, you will need at least 50% of the existing flat owners to agree to buy the freehold. It can also be a long and complex legal process.
Read more on Step By Step Guide to Buying the Freehold
The Freeholder Must Agree
If you don’t currently have a 999 year lease, the freeholder must agree to these terms. It’s not guaranteed that a freeholder will agree to these conditions. However, the freeholder can use a 999 year lease to bargain ground rent costs. They may choose to increase the costs.
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What are the Advantages of a 999 Year Lease?
There are several advantages and upsides to buying a 999 year lease. These include:
Can Increase the Property’s Market Value
Having a 999 year lease can add value to your property as people will be more likely to purchase a property where a lease extension is not required. On average, it can increase the market value by 5-7%.
The marriage value of the property will increase when its lease is extended. Overall, if you are looking to sell a property with a 999 year lease, it will be more favoured by potential buyers compared to a flat or home with a lower lease contract.
No Need to Extend the Lease
You won’t need to worry about extending your lease at any point, which will help to save you money in the long run. You can relax knowing there are no additional charges you will be expected to pay.
Property Ownership Won’t Revert
Not having to extend the lease for 999 years provides you with security. You won’t have to worry about the ownership of the property being reverted to the freeholder at any point during your lifetime. It provides long-term stability for your property.
Lower Ground Rent
Having a 999 year lease typically means that your overall ground rent will be lower. Many freeholders will use peppercorn ground rent as an incentive for leaseholders to extend their lease instead of buying the freehold. This means that the ground rent will either stay the same
As of 2022, the majority of leasehold properties have had their ground rent capped to one peppercorn. This means that leaseholders no longer have to worry about ground rent being raised to extortionate prices. This is laid out by the Leasehold Reform Act which is regularly updated in favour of leaseholders.
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Can you Extend a 999 Year Lease?
A lease can only formally be extended for up to 99 years. However, a freeholder can grant a lease of up to 999 years in some instances. As a 999 year lease is so long, it’s unlikely that you will want or need to extend this further at any point. Even so, it may be possible to do this. However, as these leases are long-term, laws may be subject to change.
What Happens When a 999 Year Lease Expires?
As with any type of lease, if a 999 year lease expires, the ownership of the property transfers to the freeholder again. This occurs through a notice given by the freeholder. Even though you have purchased the property and you own it, the freeholder owns the land. Therefore, the property will then be given back to them.
A 999 year lease can be extended if necessary. However, the freeholder will need to agree to this. It is worth noting that given the length of this lease, the expiry date of this hasn’t occurred yet and won’t occur during someone’s lifetime.
Finding a Surveyor and Conveyancer
We can help you to find the best conveyancer in the area to assist you with your lease extension. Our online form will match you with up to 6 local and verified conveyancers. Our conveyancers are either regulated by the Solicitors Regulation Authority (SRA), CLC, LSS, LSNI, or CILEX.
While hiring a surveyor can be expensive, here at Compare My Move, we can help you save up to 70% on your lease extension valuation costs. Simply fill out our online form to be matched with up to 6 trusted and verified surveyors. All our surveyors are RSPA or RICS-regulated.
