"A short lease can be the stuff of nightmares for leasehold homeowners and allowing your lease to slip below a certain threshold can effectively render your property impossible to sell"
- Jason Harris-Cohen - Open Property Group
With Labour committing to improving the leasehold sector, the latest research from Open Property Group has revealed just how many homes are currently listed for sale across the nation with a short lease, as well as the potential bargains on offer for homebuyers willing to take on the tax of extending them.
Open Property Group analysed current market data on homes with a short lease of 80 years or less, how much they command in the current market versus other comparable properties, and which area is home to the highest concentration of short lease homes for sale.
The Labour Government has promised to shake up the ‘fleecehold sector’ providing greater power and protections to leasehold homeowners and buyers, with short leases and the ability to extend them with greater ease being one core area of focus. The Leasehold Reform Act is key legislation.
The analysis by Open Property Group found that when it comes to current short-lease for sale stock, the average number of years remaining on the lease of homes listed for sale in today’s market sits at just 43.3 years.
However, this falls to as low as 24.8 years on average across the North West, with the East Midlands (33.1), Yorkshire and the Humber (38.7) and the South West (39.5) also home to some of the lowest number of remaining years on average.
The South East currently ranks as the nation’s short lease hotspot when it comes to current for-sale stock, accounting for 30% of the national total, followed by London (19%) and the East of England (16%).
The analysis by Open Property Group also shows that, on average, a short lease home commands -12% less when compared to comparable surrounding properties - a difference of around £36,000.
Although again, this price reduction differs regionally, climbing to £52,000 in the South East, £46,000 in the East of England (£41,830) and £44,000 across the West Midlands.
Short-lease flats are very difficult to mortgage if the lease is less than 80 years, and the shorter the lease, the higher the premium to extend it. But is it worth the risk when it comes to the discount available versus the time and money required to extend a lease?
It’s thought that the process of extending a lease can cost between £5,000 to £38,000 depending on a number of factors, including the time left on the original lease and the ground rent owed on the property.
Then there are also lease extension valuation costs to consider, legal fees and you have to pay Section 60 costs for the freeholder too. You may even have to pay stamp duty if the extension cost climbs to more than £125,000.
CEO of Open Property Group, Jason Harris-Cohen, commented: “A short lease can be the stuff of nightmares for leasehold homeowners and allowing your lease to slip below a certain threshold can effectively render your property impossible to sell.
"At best, a short lease is going to require you to cut your asking price expectations in order to secure a buyer due to the additional costs incurred with the process of extending it.
"Short lease homes are a current occurrence amongst those looking to sell their home quickly with Open Property Group, as the quick sale route allows them a fuss-free move, a far quicker timeline in doing so and the ability to progress their onward purchase with minimal disruption.”
