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Warning over short leases

A residential property expert is warning house buyers to be aware of the pitfalls of acquiring a property with a short lease.

Properties in the UK are either classed as leasehold or freehold. A freehold property means the owner of a home owns the building and the land it stands on, outright.

A leasehold property means a second party owns the freehold, so when such a property is bought the ‘owner’ is actually leasing the building for a small annual sum – usually for a long period, sometimes as high as 999 years.

Now Sarah Barnes, head of Residential Property at Napthens solicitors, is warning housebuyers to make sure they know their rights before acquiring a leasehold property with a short lease.

She said: “conveyancers generally advise clients against buying any property with a short lease, of less than 80 years, as it can be difficult to get a mortgage.

“Buyers may be tempted to snap up a leasehold property at a reduced price, with the idea of getting the lease extended once they have moved in. This may be attractive to cash buyers such as buy-to-let investors or a retired couple.

“However, it’s important that such buyers know their rights in relation to getting the lease extended. Generally, the shorter the lease the higher the premium to pay to extend it.

“Leaseholders generally have a statutory right to a 90-year lease extension but will have to pay, and must have owned the property for at least two years.

“The freeholder can also be approached to ask if they would be willing to extend the lease on a voluntary basis, without going through the formal procedure. However, freeholders will often offer terms which are less generous than those which they would be obliged to give under the statutory option.

“It is best for anybody concerned about their options to contact a conveyancer who can check whether they are entitled to claim an extension and can ensure the proper procedures are followed.

“It will also be necessary to seek a surveyor’s advice on the likely premium which the freeholder could demand, and it’s important to be aware that the freeholder’s solicitor’s and surveyor’s fees will have to be paid as well as their own.”