Should I Buy a Flat with a 90 Year Lease?

The most notable benefit is the lower cost since a 90-year lease is shorter than more common options, such as 125 or 999 years. The seller will have fewer options, often making it more affordable for buyers.

For example, a 125-year lease gives you 35-40 years before needing to extend the lease or move. But it typically comes with a higher price tag. A 999-year lease can add 5-7% to a property’s value, making a 90-year lease a more budget-friendly option.

If you are looking to move into a desirable area where there are more amenities such as shops, restaurants and nightlife. Purchasing a flat with a shorter lease is a good way of doing this. They will generally be less costly than those with longer leases. This is despite potentially being a similar size, layout or age.

The Leasehold and Freehold Reform Act 2024 came into law in April 2024. It is not expected to be fully implemented until latest 2025/26. The aim of the bill is to make it easier for leaseholders to extend their leases and at a lower cost.

Some of the key benefits include:

• Standard lease extension has increased to 990 years
• 2-year ownership rule before extending lease has been removed
• Removal of ‘marriage value’ premium calculations from lease extensions

A mortgage is one of the biggest barriers to purchasing a short lease flat. Mortgage providers have stricter lending criteria for properties with leases of 90 years or less. There are a couple of reasons for this, most notably the value of a property decreases as the lease runs down.

Some mortgage lenders will have stricter terms for short lease properties in comparison to longer ones. There are some options such as bridging loans which act as a short-term mortgage while you extend the lease.

If during the course of your ownership you haven’t extended the lease. When it comes to selling the property it will become more difficult to attract a buyer. This is because they will likely face the issue around getting a mortgage and it is considered a depreciating asset. This might force you to find a cash buyer. With only 30-40% of UK property buyers being cash buyers, this could prove challenging.

Additionally there may be similar properties to yours on the market which have longer leases, which attract buyers more. As a result your valuation of the property won’t match that of the market itself, making it tough to sell. A potential solution is extending the lease but this is currently a costly endeavour.

Whilst you may wish to extend the lease before purchasing, the seller is under no legal obligation to get this arranged with the freeholder. If they are looking for a quick sale, this is especially the case. You will have the opportunity to extend once you own it, though the freeholder will need to agree to this.

Buying a leasehold property results in more steps than a freehold purchase. This is because there is an extra person in the process - the freeholder. There are other reasons why the process takes longer for a 90-year lease. Most notably if can extend the lease, this will require a conveyancer to help.

As stated, the seller is under no obligation to extend the lease. But that doesn’t mean you cannot ask. If the seller agrees to serve a Section 42 notice, which is the official lease extension process. This will remove the burden that comes with a short lease property. As a result of increasing the length of lease, the valuation of the property is likely to increase as well. This will of course impact negotiations with the seller.

If the seller has agreed to extend the lease before the sale, one of the key factors to decide is who will cover the cost. If you are paying the market value for the flat as though the lease has already been extended, then the seller should cover the cost of the extension. If you are paying the market value based on the current years on the lease, then it is your responsibility to pay for the extension.

There are a couple of reasons why you might need to get a lease extension valuation. The first is that the seller has agreed to extend the lease and you would like to get your own valuation. This is relevant especially if the cost of the extension is included in the sale price.

The other reason would be the seller does not wish to get the lease extended before the sale but you would still like to extend. You might want to get it valued so that you know what it's going to cost you, once the sale is complete.

There are several aspects that the surveyor takes into account when valuing the lease extension. These include:

• The current market value of the property
• How much the property is worth with the lease extension
• The remaining lease term

If you are looking for a lease extension valuation, use Compare My Move. We can connect you with up to 6 surveyors in your local area who can provide a valuation for your lease extension.