What Happens At The End Of Leasehold Term? Lease Expiry Laws

Apartment - What Happens At The End Of Leasehold Term

If you are thinking about buying a flat or an apartment, it is likely to be a leasehold property. If so, you may be wondering what happens at the end of leasehold term.

What happens at the end of leasehold term on a leasehold property like a flat is the lease agreement runs out and the property reverts back to the freeholder who owns the building. Once the lease has expired the property must be vacated by the lessee* as the lease agreement has ended.

* A lessee is the person who holds the lease of leasehold property, or in other words the ‘owner’ of the flat or apartment.

Please also read this article to discover how you could save £71,475 on your next mortgage if you sell your house and rent before buying againEven I was amazed when I did this calculation! The strategies you learn in this article will not only save you money, but it will also reduce your stress when buying your next home.

But first things first, it’s probably best to understand the meaning of a leasehold property.

Leasehold property meaning in lay terms:

When you buy leasehold property you are purchasing the right to occupy the property for X number of years*, which is the length of your lease and is contained in the lease agreement.

As part of your lease agreement you also agree to an obligation to contribute to the cost of maintaining the communal areas of the building, including the structure and the roof. You also have to pay ground rent, which is paid to the freeholder for the ‘use’ of the ground and building which is owned by the freeholder.

* In the context of this article, it is the “X number of years” we are looking at. When you buy a leasehold property it is important to consider how many years are left to run on the lease, as this not only affects how long you can live in the property until the lease runs out, but it also affects the mortgageability of the property too. If there are too few years left on the lease, most mortgage lenders will not lend to buyers to buy the leasehold property.

What happens at end of a leasehold and the lease runs out?

Once the lease ends on a leasehold property, the property will revert to the freeholder who owns the freehold of the building. When the leasehold term has expired you will no longer have any right to stay in the property, and you would have to vacate it immediately.

It is important to check the unexpired term on the leasehold agreement, and not the original lease term. For example, if the original lease term on a leasehold flat was 125 years from 1 January 2016 and you are looking to buy this flat in March 2022, 6 years have already expired. The remaining term on this lease would be 119 years.

How to check leasehold length UK

How you check leasehold length and how many unexpired years are left on the lease, these are your options:

  1. The unexpired lease term should be include on Rightmove listings (see image below).
  2. Ask the estate agent selling the property.
  3. Ask the seller for a copy of the lease.
  4. Apply to Land Registry and pay a fee of £7.
  5. Ask your solicitor to obtain details of the lease*.

* If you’ve not made an offer, option 5 should be a last resort, as this will cost you to find out. The £7 is an acceptable cost to find this information from Land Registry, but the fees of a solicitor may not be, especially if you don’t end up buying the property.

Rightmove listing of leasehold flat showing lease length - How to check leasehold length UK
Apartment listing on Rightmove – image courtesy of Rightmove

You’ll notice in the above image that the estate agents have included the lease length, which in this case is 125 years from 1988. This means that when this flat was listed on Rightmove, which was added on 27 July 2021, the lease had an unexpired length of around 92 years.

I have also highlighted the annual service charge of £1,703.04 and annual ground rent of £496.44 for this leasehold property. These are two expenses the owner of a leasehold property is liable to pay throughout the lease term.

Can you be evicted from a leasehold property?

You can be evicted from a leasehold property if the freeholder can prove the lease has been breached or when the lease runs out or expires at the end of the lease term. Leasehold properties begin with lease terms of somewhere between 99 years and 999 years.

You may be interested to also read “Why would anyone buy a leasehold property“, or about “What Are The Disadvantages Of Buying Leasehold Property” before committing to buy a leasehold property yourself.

Most mortgage lenders don’t lend on leasehold property with an unexpired term of under 70 years, and leasehold property with a remaining term of 80 years or less are difficult to sell. You are therefore recommended to not buy a leasehold property if the unexpired lease term is less than 90 years.

Can the lease term be extended?

The lease term on leasehold property can be extended by paying an extension fee to the freeholder before it gets too short or to prevent it from expiring. The amount paid for a lease extension is calculated using the unexpired lease term, the current value of the leasehold property and annual ground rent.

The earlier you apply to extend the lease the better, as it will be cheaper to extend. If the unexpired lease term falls to 80 years or less the calculation of the lease extension fee will include its marriage value.

Current legislation in England and Wales states that where the unexpired term of the lease is more than 80 years, the marriage value is nil.

How to extend a lease on a leasehold property

To extend a lease on a leasehold property you need to enter into a lease extension negotiation with the freeholder. But the calculation of the amount to pay for the lease extension, including any marriage value if the unexpired term on the lease is 80 years or less, is a complex calculation.

You are best advised to seek professional advice from a Leasehold Valuation Expert who will calculate the extension amount and negotiate on your behalf.

What happens when 99 year lease expires?

When a 99 year lease expires the leasehold property reverts back to the freeholder and the leaseholder must vacate the property. But it’s important if you buy a 99 year leasehold property to confirm the unexpired term, as this is what you are buying.

What happens when 100 year lease expires?

When a 100 year lease expires the leasehold property reverts back to the freeholder and the leaseholder must vacate the property. But it’s important if you buy a 100 year leasehold property to confirm the unexpired term, as this is what you are buying.

What happens when 125 year lease expires?

When a 125 year lease expires the leasehold property reverts back to the freeholder and the leaseholder must vacate the property. But it’s important if you buy a 125 year leasehold property to confirm the unexpired term, as this is what you are buying.

Final thoughts about what happens at the end of leasehold

If you decide to buy a leasehold flat, it’s important you realise that you won’t have the freehold ownership of it, like you would on a freehold house. But instead, you’ll have purchased the right to rent your flat or apartment from the freeholder (landlord) for a small annual ground rent for the lease term.

But ownership of the property will remain with the freeholder at all times, and when the lease runs out the property will revert to the freeholder, as you no longer have an agreement to remain.

It is also important to note that during the lease term you have full use of the property, subject to any covenants, and you have leaseholder rights which includes the right to extend the lease.

It is far cheaper to extend the lease when the unexpired lease is long, and this becomes more expensive as the lease term gets shorter.

Please also remember to read “Why would anyone buy a leasehold property“, or about “What Are The Disadvantages Of Buying Leasehold Property” too before you commit to buying a leasehold property yourself.

Please don’t forget to read this before you leave…

Please don’t forget to also read this article to discover how you could save £71,475 on your next mortgage if you sell your house and rent before buying againAs I said earlier, even I was amazed when I did the calculations! Learn about how you will reduce the stress of moving house, whilst at the same time potentially save thousands in the process!

I hope you’ve enjoyed this article about what happens at the end of leasehold term

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Also, if you have any questions, please feel free to comment below too. Please also share any of your experiences with properties you’ve bought. Alternatively, if you need more help, please feel free to contact us on our contact us page here. Or join the discussion and ask your question in the property forum.

What Happens At The End Of Leasehold Term? Lease Expiry Laws

Article written by Russell Bowyer who has been investing in property since purchasing his first commercial property in the 1990's for his own Chartered Accountancy business. But his first property investment project was to turn an old dilapidated restaurant into a large 5-bed home, which he purchased for £117,500 and sold for £450,000 (to see an "after" photo of the house before it was sold see here: About). Russell owns a number of investment properties, which includes houses, flats and HMO's. More recently he has turned his creative side to investing in property using lease options. His largest lease option deal to date was to acquire 12 properties worth over £2 million for just £12, which means he paid just £1 to acquire each property!

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