Does a short lease matter?
Certain things in life are inevitable – death, taxes and the raw truth that day by day, your lease is getting shorter. But does a short lease really matter?
Quite apart from the fact that if you don’t extend your lease then eventually it’s going to expire and you will no longer own that flat, ending up with a short lease has some problematic consequences.
Not least amongst the potential problems with a short lease is the fact that, increasingly, mortgage lenders are reluctant to lend on short leases. So, selling a flat with a short lease may prove difficult.
But don’t just take our word for it – at the bottom of the page you will see an extract from the latest figures on the Council of Mortgage Lenders website [accurate as at 2/12/13] which shows that it’s starting to become pretty difficult to obtain a mortgage on any residential property with a short lease.
And what do we mean by a short lease? There is no legal definition of a short lease and there is no doubt that in the last 10 years, mortgage companies have really moved the goalposts by requiring increasingly longer leases before they will consider a loan. As you’ll see, many of the leading mortgage companies won’t even consider a mortgage on a lease with less than 70 years to run – so, and this is just a personal opinion, probably anything either below, or even approaching that crucial 70 year mark is a short lease and any property with that length of term remaining is going to be difficult to sell.
Selling a short lease – our expert advice
To make sure you get the best price for your property and to maximise the number of possible purchasers, you need to make sure either that;
1. you extend your lease well above the 70 year mark in advance of putting your property on the market OR
2. if you don’t have the cash to extend your lease extension, or you don’t want to wait for a leasehold extension to be completed,[and if you go down the safer formal route this could take up to six months or so] then you can start the process of lease extension yourself, by instructing a solicitor to issue the formal lease extension notice – and then transfer the right to extend the lease to the new purchaser. However, if you go down this second group, any sensible purchaser will look to reduce the price they going to pay you for your flat by the very least the likely cost of the lease extension, and probably a bit more on top.
NB although it’s not directly linked to selling your flat, please do be aware that the cost of lease extension goes up significantly when the remaining term of your lease dips just one single day below 80 years. So, regardless of whether you’re looking to sell your flat, if possible make sure you extend your lease well in advance of that 80 year period – we could end up paying thousands of pounds more for your lease extension. [Want to know why? Click here to find more about marriage value and your lease extension.]
Now is the right time to extend your short lease
While a lease extension for your flat always makes good financial sense, now is a great time to extend your lease. Why?
The UK housing market has been quite depressed for some to, but currently there appears to be a genuine revival in the housing market, which industry experts think could last for a few years. That means that the price of property generally is likely to go up and that in turn means that the cost of extending your lease will increase. So why wait for the price to go up – extend your lease today.
What minimum unexpired lease terms do mortgage lenders require?
Minimum unexpired lease term
|Allied Irish Bank (GB)||70 years remaining at expiry of mortgage term.|
|Bank of Ireland (UK)||70 years unexpired from the date of completion of the mortgage.|
|Bank of Ireland||70 years unexpired from the date of completion of the mortgage.|
|Bank of Scotland||Minimum 70 years from the date of the mortgage.|
|Barclays Direct (formerly ING Direct)||Mortgage term plus 30 years.|
|Birmingham Midshires||Minimum 70 years from the date of the mortgage.|
|Bradford & Bingley||The lease must have at least 25 years remaining at the end of the mortgage term.|
|Britannia||70 years unexpired at application, 30 years at the end of the mortgage term|
|Co-operative Bank||70 years unexpired at application, 30 years at the end of the mortgage term|
|Halifax||Minimum 70 years from the date of the mortgage.|
|HSBC Bank||The mortgage term plus 25 years|
|Intelligent Finance||Minimum 70 years from the date of the mortgage.|
|Leeds Building Society||Mortgage term plus 40 years.|
|Lloyds Bank||Mortgage term plus 30 years subject to an overall minimum of 70 years|
|Nat West||Mortgage term plus 30 years.|
|Nationwide Building Society||Our minimum unexpired lease term is 55 years subject to at least 30 years remaining at the end of the mortgage term.|
|Tesco Bank||Mortgage term plus 30 years (subject to a minimum unexpired term of 55 years).|
|Royal Bank of Scotland||Mortgage term plus 30 years.|
|TSB||Mortgage term plus 30 years subject to an overall minimum term of 70 years|
|The Woolwich||Mortgage term plus 25 years|
|Yorkshire Building Society||60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage|
Extending your short lease – contact our specialists now
if you’re thinking about a UK lease extension, make sure you instruct a specialist solicitor to help you because the legal process involved is complex. Our lease extension team concentrate on lease extension and enfranchisement only – so we have the specialist expertise you need. So, for FREE initial phone legal advice:
- Call our specialists now on FREEPHONE 0800 1404544 or
- Send us an email via the contact form below.
Comments or questions are welcome.