Buying your first flat, or even your second, is often an exciting time, but when you come across a leasehold property where the remaining lease term is short, your heart might skip a beat. You see the lower price, the location seems ideal, and you tell yourself, “I’ll deal with the lease later.” But that’s where things can go wrong.
We’ve seen too many buyers undervalue the risk associated with short leases and later regret it. If you’re considering a leasehold home in New Cross, Telegraph Hill, Brockley or elsewhere in South East London, you must understand the risks of buying short lease property before exchanging.
Call us on 020 7358 1188 or email us at , and we’ll take you through what you must watch out for.
Warren Kerr Estate Agents believes every property decision should be made with confidence, not compromise. Let our experience guide you safely through the complexities of leasehold ownership.
Why Do Short Leases Occur?
Before diving into the risks, let’s very briefly cover why leases get short:
- Many flats were sold on 99 or 125-year leases, often several decades ago. As time passes, the lease term decreases.
- Some properties may have had lease extensions previously, but those extensions themselves get shorter over time.
- Sometimes, the original freeholder or developer might have limited the initial lease term (especially in new or mixed-use developments).
Because of our specialist knowledge in leasehold enfranchisement (extending a lease, right to manage or collective freehold), we frequently guide clients through how much the lease structure can make or break a deal.
The Key Risks Of Buying A Short-Lease Property
Below, we outline the primary risks you should be aware of. These are not theoretical; they directly affect your finances, legal standing, and resale potential.
1. Difficulty Obtaining A Mortgage / Higher Costs
Many lenders impose strict minimum terms for a remaining lease (often 80 years or more). If the lease has dropped below that, you may be refused a mortgage or charged a higher interest rate. Some lenders require you to extend the lease before they will finance it.
Thus, one of the first risks of buying short-lease property is that your funding may fall through, or the cost of borrowing escalates.
2. Reduced Property Value And Poor Resale Prospects
As the remaining lease term declines, the property value typically falls, sometimes sharply, once it drops below certain thresholds (for example, 70 years or 50 years). Buyers and investors tend to shy away from short leases, thereby shrinking your pool of potential buyers.
If you later try to sell, you may struggle to get an offer close to what you expected.
3. Expensive Lease Extension Or Enfranchisement Costs
When a lease is short, the premium you must pay to extend it (or pursue collective enfranchisement) will be high. The shorter the lease, the higher the “marriage value” component in the valuation, meaning you pay more to the freeholder.
We’ve helped clients manage this in South East London via lease extension strategies.
4. Uncertainty Over Freeholder Cooperation
If the freeholder is unwilling or difficult (for example, non-responsive, overseas, or insolvent), negotiating lease extension or enfranchisement can become protracted. You may face legal challenges, appeals to the tribunal, or delays that cost you time and stress.
5. Unpredictable Ground Rent, Service Charges And Hidden Clauses
Short leases sometimes carry onerous clauses, such as escalating ground rent or complex service-charge obligations. You may be locked into terms that feel unfair when the lease is nearing expiry.
Over time, these charges can increase significantly and erode the value of your property investment.
6. Mortgage Deeds / Lender Restrictions Later On
Even if you currently secure a mortgage, some lenders may insist that you maintain a minimum lease during the life of the loan. If your lease falls too low later, you may breach your mortgage terms or find refinancing difficult.
Also Read: Pros And Cons Of Leasehold Vs Freehold
Mitigating Those Risks: What You Should Do
Knowledge is power, and here are some prudent steps to take when considering a short-term lease property.
1. Obtain A Leasehold Survey And Valuation Early
Always commission a qualified surveyor or leasehold specialist to assess the lease and estimate the extension costs before committing.
2. Check Mortgage Lender Policies Upfront
Before making an offer, check with your mortgage broker whether the remaining lease period is acceptable. If not, work the cost of extending into your offer.
3. Use Expert Legal And Leasehold Advice
A solicitor specialising in leasehold matters can help you spot pitfalls, ensure proper notices are drafted, and protect your rights.
4. Negotiate The Lease Extension Or Enfranchisement Pre-Completion
Where possible, negotiate with the freeholder to extend the lease before you complete or include a clause in the contract requiring it to be done.
5. Consider Future Resale And Exit Strategy
Think long-term: even if you intend to live there for many years, consider the resale value. If the lease becomes too short, you’ll be at a disadvantage.
6. Work With An Expert Local Agent
As we emphasise in our buying a leasehold property guide, it’s helpful to have professionals who deeply understand leasehold mechanics and local market behaviour.
Contact Warren Kerr Estate Agents
Conclusion
Buying a property with a short lease carries risks, including difficulty securing funding, reduced value, high extension costs, and complex legal hurdles. But armed with the right advice, proper due diligence and expert support, you can navigate those dangers with confidence.
If you’re actively looking in SE London and want to understand the risks of buying short-lease property in your specific case, we’d be happy to assist. You’ll deal directly with us, and we’ll walk you through the process.
Call us now on 020 7358 1188 or email to discuss your leasehold property plans. Let’s make sure your investment is secure rather than speculative.
FAQ: Risks Of Buying Short-Lease Property
Q1: What is considered a “short lease” in practice?
A: Generally, fewer than 80 years remaining is a red flag. Once it drops below that, lenders become cautious.
Q2: Can I extend the lease after I purchase it?
A: Yes, but the shorter the remaining term, the more expensive the extension will be due to marriage value.
Q3: Can short lease issues be solved later?
A: Yes, but you may pay a premium and endure negotiation or legal costs.
Q4: Will short-lease properties always lose value?
A: Not always, as location, condition, and lease extension potential all play a role.
Q5: Should I avoid all short-lease properties?
A: Not necessarily. If the location is correct, extension is feasible, and you’re informed, it can still be an opportunity, but with caution.
