Flats with a 90-year lease are typically cheaper than properties with a longer lease. According to UK Government statistics, flat ownership is most common under leasehold agreements, with around 72% of all flats in the UK sold on a leasehold basis.
Whilst a flat with a 90-year lease may seem like an attractive proposition, there are important financial factors to weigh up, not only the purchase price, but also ongoing expenses such as ground rent, service charges, and even the potential cost of extending or buying the freehold in the future.
In this article, we will explore the pros and cons of buying a flat with 90 years remaining on its lease and the steps you should take before making your decision.
Should I Buy a Flat with a Short Lease?
Any property with less than 80 years on the lease is considered a short lease. 90 year leases do not fall in the same category, however, you may face similar issues during the buying process. So what happens if the leasehold expires? If the leasehold expires, ownership goes back to the freeholder, and the leaseholder loses the right to live in or sell the property.
If you are considering a short lease property it is worth extending the lease to help retain the property's value. It will also prevent any issues further down the line.
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What are the Pros of Buying a Flat with a 90 Year Lease?
There are a few positives to buying a flat with 90 years left on its lease. While this isn’t classed as a “short lease” (that’s under 80 years), many lenders treat 90 years as a borderline figure, so it’s worth understanding both the advantages and risks. So what happens if the leasehold expires? If a property's lease runs down to zero years, ownership reverts to the freeholder, and the leaseholder loses the right to live in or sell the property.
Costs Less Than a Longer Lease to Buy
The most notable benefit is the lower cost since a 90-year lease is shorter than more common options, such as 125 or 999 year lease. However, you should weigh this saving against the future cost of extending a lease, which can become significant once the term drops closer to 80 years.
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. Get a better understanding from our guide on solicitor fees for leasehold properties.
It is important to know that a leasehold management pack will be needed when buying any leasehold property, regardless of the lease length.
Affordable Prime Locations
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.
Leasehold and Freehold Reform Bill
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
Industry Insight
"Comparing a 90-year lease with something like 115 years, I'd expect to see around 5% difference in price. But here's the thing, it depends on whether the agent who listed it has actually priced that in. I'd always tell buyers to do their own local comparables to check they're not paying 115-year prices for a 90-year lease. The big drop-off happens at 80 years when marriage value kicks in, but at 90 you've still got time to plan."
Jack Brown, Founder, Blockland
What are the Cons of Buying a Flat with a 90 Year Lease?
There are disadvantages to consider when purchasing a flat with a 90 year lease. Some of these include:
Harder to Get a Mortgage
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. Many lenders prefer leases to have at least 85 years remaining at the start of a mortgage term, so anything close to this threshold may reduce your options.
Tough to Sell
If you haven’t extended the lease during your ownership, selling the property can be more difficult. Buyers (and their lenders) will look not only at the current lease length but also how many years will remain once their mortgage ends. If it’s projected to dip under 80 years during that period, the property will be much less attractive, making resale challenging.
Difficult to Extend Before Buying
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.
Longer Conveyancing Process
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.
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What Should You Do Before Buying a Flat with a 90 Year Lease?
If you are considering buying a flat with 90 years on its lease, there are a few things you should do before committing. They are the following:
Ask the Seller to Extend the Lease
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.
Decide Who Pays for the Lease Extension
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. This can add thousands to the transaction, so make sure you factor in the cost of extending a lease early.
Get a Lease Extension Valuation
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 5 surveyors in your local area who can provide a valuation for your lease extension.
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What Happens if the Freeholder Refuses to Extend the Lease?
The freeholder cannot refuse to extend the lease if the leaseholder (seller) has owned the property for at least 2 years and the lease has 21 years on it. Outside of this, the freeholder can refuse an extension.
Once the Leasehold and Freehold Reform Bill comes into force, the 2-year rule will be scrapped which benefits leaseholders.
In some cases they might accept an extension but are not willing to meet terms on the extension itself. This might happen in cases around the valuation of the extension in which case a leasehold valuation tribunal might be required.
Finding a Conveyancer
Compare My Move can help you find the right conveyancer for your needs. Simply fill in our comparison form to compare conveyancing quotes from up to 5 licensed firms. You could also save up to 70% on your conveyancing costs.
A solicitor familiar with leasehold purchases can also flag risks such as rising ground rent or a lease edging too close to 80 years, helping you make a more confident decision.
Solicitors Regulation Authority (SRA)
Council for Licensed Conveyancers (CLC)
Law Society of Scotland (LSS)
Law Society of Northern Ireland (LSNI)
Chartered Institute of Legal Executives (CILEX)
