Home → Finance →

What Happens at the End of a Leasehold?

Written by, Marija Petkova

Updated September, 19, 2022

If you currently own a leasehold property or are considering buying one, you probably have concerns about what happens at the end of a leasehold.

Can you be evicted from the property? Is extending the lease an option? And the biggest question of all—is buying a leasehold property worth it?

Keep on reading for the answers. 

What Is a Leasehold?

A leasehold property is one that you own for a fixed period of time

You and the freeholder (also called the landlord) sign a legal contract known as the lease, which details how long you own the property. 

A lease is usually years or decades long, with some leases being 999 years long. When (and if) the lease ends, ownership of the property is returned to the freeholder. 

Leasehold vs Freehold

Typically properties in England and Wales are either a leasehold or freehold. 

A freehold is when you own the property and the land it sits on outright. 

Most flats are leasehold properties with the builder acting as the freehold. In some cases, when a house is converted into a residential building, flats are sold with a share of the freehold, which normally involves a resident management company.

Houses can be leasehold properties as well when they’re bought through a shared ownership scheme. However, most houses are sold as freehold properties.

If you want to learn about other types of finance lease deals, take a look at this helpful guide.

What Happens at the End of a Leasehold?

Leaseholds rarely expire. In general, a leasehold agreement can be years, decades, or even centuries-long, with most leases ranging between 90 and 120 years.

If the leasehold does end, the property will technically pass on to the freeholder, and you will no longer have any legal rights to it, even if you have paid ground rent during your lease or paid off the mortgage.

I’ve reached the end of my leasehold. What happens now?

You do not have to leave the property when the lease runs out. The terms will continue to be the same unless you or your landlord take specific steps to end the lease. These steps can include:

  • The leaseholder voluntarily opts for an end of a lease early, although they should inform the freeholder at least one month before the lease runs out. 
  • The freeholder chooses to end the lease. In this case, the freeholder needs to obtain the court’s permission to gain possession of the property and serve you with a formal lease non-renewal notice. Keep in mind that the termination of a lease by a landlord is very rare.
  • The freeholder might also serve a prescribed notice suggesting an assured periodic tenancy, during which you pay monthly rent. They may also suggest other changes to the lease agreement. 

If none of these have happened, you can extend the lease or buy the freehold. To get a better idea of which is the better option for you, consult a lease expert. 

Can I be evicted from the property at the end of a leasehold in the UK?

You can’t be evicted from the property unless the freeholder proves that you are in breach of the leasehold agreement. 

Finding Out How Long You Have Left on the Lease

Usually, a ‘good’ lease length is one with over 90 years remaining. 

If there are less than 80 years remaining, this is considered a ‘short leasehold’ and automatically decreases the value of the property by 10 to 20%. Mortgage providers are also less likely to offer financing on such properties.

The simplest way to see how much there is left on your lease is to take a look at the Leasehold Title and check for yourself. If you do not have access to the document, you could get a copy of the Title from the Land Registry for £7. 

When buying a leasehold property, the estate agent will tell you how long there is left on the lease, either when they display the property for sale or during the conveyancing process.

The procedure is similar in Northern Ireland, although there are some minor differences. Things work differently in Scotland, though, so if you are interested in buying a property there, it’s best to read up on the regulations beforehand

How Can I Extend The Leasehold?  

You can start the lease extension procedure once you have owned the flat or house for at least two years. 

There are two ways to extend your lease: formally and informally, with the second one being more common. In this scenario, you ask the landlord to extend your lease for 90 years (when the lease runs out on flats) or 50 years (at the end of leasehold for houses) and negotiate the extension. Keep in mind that the freeholder is not obligated to agree to an extension. 

Different procedures may apply if you are extending the lease on a share of freehold.

With the formal route, leaseholders need to meet certain criteria to be able to extend their lease. The freeholder and leaseholder will then need to adhere to a predefined procedure and a strict time frame to extend the lease. 

Although complicated, a formal extension is a more secure route as it gives you a dispute mechanism in case you don’t reach an agreement with the landlord. 

How much does it cost to extend a leasehold?

The cost depends mainly on the number of years left on the current leasehold, the amount you pay in ground rent (if any), the market value of the property and the value of any improvements you might have made to the property. 

You would also have to factor in the solicitors’ fees and the cost of valuation (yours and the freeholder’s) as well as the legal fees involved in checking whether you are entitled to get an extension after the end of a leasehold in the UK. 

In general, you would need to pay £4,500 (or £8,500 including legal and other fees) for adding 90 years to a £200,000 flat (with 90 years remaining on the lease). If there are 60 years left on the existing lease, then the cost could go up to £28,000, or £32,000 in total.

So, the earlier you approach the freeholder to extend the lease, the less it will cost you. 

Calculating the cost of a lease extension can be quite complicated. To get an idea of how much it would set you back, there are several online lease calculators you can use.  

Buying the Freehold

An alternative to extending the lease agreement is buying the freehold.  

The procedure is the same- you can approach the freeholder and ask them if they are interested in selling the property, or you could try the formal route, provided you are eligible. 

Keep in mind that when it comes to flats, buying the freehold can cost as much as extending the lease, and it can be just as complicated. With the end of a leasehold on houses, the process is much simpler and a better option than getting an extension. 

Should I Buy a Leasehold?

If you have a property that you love or purchasing a freehold is not financially feasible at the moment, then buying a leasehold property is a good option. 

However, leases can be tricky and costly. In addition to the eventual end of a leasehold, there are other disadvantages to consider. 

The leaseholder is required to pay a service charge that includes maintenance costs, building insurance, a sinking fund, i.e. a pot of money used to pay for major repairs on the property, and in some cases, ground rent. 

You have to pay ground rent only if it is mentioned in the lease. Under the new legislation, if your lease was granted on 30 June or after, you will not pay any ground rent. 

Since service charges are not capped, leaseholders could pay £100 or more than £1,000. And this is on top of mortgage repayments. 

What’s more, extending the leasehold or buying the freehold after the end of a leasehold on a property is complicated and quite expensive. 

If you are set on buying a leasehold property, then choose one with a long lease, i.e. one that has at least 90 years left on the lease.

                           

Frequently Asked Questions And Their Answers

What happens when a 99-year lease expires in the UK?

When a lease expires, the leaseholder will continue to live on the property under the same terms unless they or the freeholder decide to end the lease. If this happens, the leaseholder can either extend the leasehold (if eligible) or buy the freehold. Otherwise, ownership of the property reverts back to the freeholder

Do leasehold properties lose value over time?

Yes, a leasehold with 80 years remaining loses 10 to 20% of its value, making it harder to sell. At the same time, the cost of extending the lease skyrockets.

Can a freeholder refuse to extend a lease?

Yes, if you have not owned the leasehold for at least two years before asking for an extension, the freeholder can refuse. Although in most cases, the leasehold approaches the landlord to negotiate an extension in an informal manner, and the freeholder rarely refuses. 

Can I sell a property with a short lease?

Yes, but it is tricky. Since the value of a leasehold property with a short lease drastically decreases, as does the number of lenders willing to offer a mortgage, you might find yourself with limited options. The best thing to do is to extend the lease before it hits 80 years or lesshighlighting the importance of finding out exactly what happens at the end of a leasehold and how many years are left on your lease.

My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.