Triangle Legal Services

What happens when a property leasehold runs out?

If you are buying a leasehold property or are currently a property owner with a lease agreement that is coming to an end, you might feel a little overwhelmed by what this means for you.  

This guide will explain what happens when a lease expires and offer broad advice about your next steps to avoid unexpected financial and legal complications. 

What is a leasehold?

In the UK, many properties are sold as residential leasehold, meaning the owner has the right to occupy the property for a set period. A leasehold property means you own the property but not the land it stands on. The land is owned by a freeholder.

Lease lengths vary, commonly starting from 99 to 999 years. Knowing how many years are left on the lease and monitoring it as it decreases is essential to maintaining property value and legal standing. The new Leasehold and Freehold Reform Act 2024 will bring about changes to leasehold contracts when it comes into force. More information is available about this on our Lease Renewals and Extensions page.

What is the difference between a leasehold and a freehold property?

The main difference between freehold and leasehold properties lies in ownership.

With a freehold property, you indefinitely own the building and the land it stands on. This means you have full control over the property and are responsible for its maintenance and any associated costs.

In contrast, a leasehold property means you own the building for a specified period, as outlined in the lease agreement, but not the land on which the property is built. The land is owned by a freeholder, and it is likely you will need to pay them ground rent, service charges, and maintenance fees. As the years left on the lease decrease, the value of the property can go down, and renewing the lease or buying the freehold can be necessary to maintain its value.

Understanding leasehold timelines

Leaseholds have a set time limit, and as the end of a leasehold agreement approaches, the consequences become more significant. Under the current laws, when the remaining lease falls below 80 years, extending it becomes more costly because of “marriage value.” This is the added value that comes from having a long lease, which the freeholder will charge for. When the Leasehold and Freehold Reform Act 2024 comes into effect, the process will get cheaper and easier for leaseholders, but until then, leaseholders must follow the existing terms and obligations.

To avoid these higher costs, it’s important to keep an eye on the length of the lease and take action early.

What happens when the leasehold expires?

You might be wondering what happens when a residential leasehold expires and whether this is something you need to worry about.

When a leasehold expires, it can lead to serious problems. Legally, you could lose possession of the property (i.e. the right to live in your home) because the property would revert back to the freeholder.

Financially, the market value of the property could drop dramatically as homes with short leases are often less attractive to buyers and mortgage lenders. The knock-on of this is that should you need to remortgage or decide to sell the property, you could be in for a nasty surprise. Because of this, we advise you to manage expiry issues well before they become urgent.

Options when your lease is running out

Extend the lease

For many people, a lease extension is a common solution. In the UK, leaseholders have the legal right to extend the lease by 90 years if they’ve owned the property for two years. This process involves paying a premium to the freeholder.

Buy the freehold 

Another option is buying the freehold, known as enfranchisement. This is possible if a group of leaseholders in a block of flats collectively buy the freehold, giving them greater control over the property management and potentially reducing costs in the long run.

Legal rights and protections

The Leasehold Reform Act provides significant protections. If your remaining lease term is below 80 years, you should act swiftly to avoid higher costs due to marriage value. You also have the right to manage your building, allowing more control over maintenance and management decisions.

Costs involved with leasehold properties

Extending a lease or buying the freehold involves several costs, and Triangle Legal Services can support you through every step:

  • Valuation Fees: An independent surveyor will assess the premium payable to the freeholder.
  • Legal Fees: Both parties will incur legal costs.
  • Premium Payment: The amount paid to the freeholder to extend the lease.

Negotiating with freeholders can be complex, but Triangle Legal Services is experienced at handling lease renewal and extension matters to ensure the best possible outcome.

Steps to take when your lease is coming to an end

  1. Begin the process before your lease drops below 80 years.
  2. Contact Triangle Legal Services. We’ll explain your rights and the costs involved.
  3. Inform the freeholder that you want to extend your lease. If you can’t find your freeholder, we can help locate them.
  4. Choose a surveyor who is skilled in valuing lease extensions. If you use our solicitors, we can recommend a trusted surveyor.
  5. Sit back, knowing we will take care of all the legal paperwork and negotiations with the freeholder.

With our experienced team handling the process, you can ensure a stress-free experience and secure your property’s future.

Need help with your lease expiry or purchasing a leasehold property?

It’s important to be aware of how long you have left on your leasehold so you can take action and seek professional advice when’s due to run out.  

Triangle Legal Services provides full support for renewing leases and buying freeholds, helping you protect your property’s future. Contact us today so we can offer you specific advice for your residential leasehold property.