Buying a flat on a 5 year lease

by The Chartered Surveyor

Question

We are thinking of buying a flat with 5 years lease left (down from an original 39 years). The owner has served notice for lease extension and the other flats in the block have already extended their leases. Is there anything I should be worried about given the current short lease? I have heard hat properties with less than 5 years of lease can be refused lease extension due to claim of redevelopment, but can this be the case when other flats in this development have had their leases extended?

Answer

At 5 years unexpired there are a number of challenging aspects to the claim. If the freeholder intends to redevelop part or all of the property, the claim may be refused. It is unlikely, if other adjacent flats are held on longer leases, that this will be the case. However, the other leases may have a clause for early termination in the event of redevelopment. This is particularly likely if the extended leases were granted under the relevant legislation. Your solicitor ought to be able to advise you further.

You should also be aware that extending a lease with only 5 years unexpired is likely to be very expensive. You will  pay the freeholder a large proportion of the value of the property with a long lease. Professional fees will further add to the costs. Given its value, you may well find you have a fight on your hands in agreeing the premium. Cases such as this often end up at Tribunal for determination, which can further add to costs. 

You ought to commission advice from an appropriately qualified solicitor and an appropriately qualified valuer before committing to the purchase.