Is a 999 Year Lease Worth It?
(Last Updated: 29/05/2024)
24/05/2023
203
4 min read
Key Takeaways
- 999 years is the maximum term for a lease.
- A formal lease extension is limited to 90 years, but an informal extension can extend up to 999 years.
- Extending to 999 years can add 5 to 7% to the value of the property.
The Leasehold and Freehold Reform Act 2024 was passed on the 24th May 2024, but is not yet in effect and the date for this is not yet clear. We will update our content as and when the finalised legislation is published. Read more - Expected changes
Is it worth buying a 999 year lease?
A 999 year lease is the most attractive buying option when it comes to leasehold properties, especially if the ground rent is low. Longer leases like this are valued pretty much the same as an equivalent freehold, so are easy to sell on and to mortgage.
In the past, 999 year leases were mis-sold as 'good-as-freehold' for this reason, but buyers were faced with a nasty surprise when they realised their seemingly reasonable ground rent would double every ten years. This meant the freehold value (calculated based on the total ground rent payable over the remainder of the lease) was very high, and leaseholders were faced with a difficult choice: pay tens of thousands to buy out the freehold (tens of thousands more than the property was worth had it been sold as freehold in the first place) or pay ever increasing ground rent until they sold the house, or died.
Fortunately, thanks to the leasehold reform updates of 2022, most new residential leaseholds have their ground rent capped at one peppercorn (literally one peppercorn, per year), though pre-existing leases may still be subject to increasing ground rent. Check this on any lease you are considering purchasing. Your conveyancing solicitor may be able to help you vary the terms of the lease (all formal lease extensions will reduce the ground rent to one peppercorn immediately on the completion of the extension, but on informal extensions the new ground rent will not take effect until the original 999 year lease expires, so fairly unhelpful in this context).
With peppercorn rent, the question of whether it is worth buying a 999 year lease comes down to restrictions and service charges. As with any lease, you will not be able to do certain things to the property. For example, it is unlikely you'll be allowed to extend or make major alterations to the property and many leases explicitly prohibit pets.
On the other hand, many leaseholders enjoy their freedom from the responsibility of maintaining and repairing the building, boundaries, gardens, drains, roof, and shared spaces, knowing that the landlord takes care of it all in exchange for a reasonable service charge.
If the property's freeholder takes good care of things, it is worth buying a 999 year lease. If you are concerned about having more control over the property, you may even be able to purchase a share of the freehold, through lease enfranchisement with the other lease owners.
Can you extend a lease to 999 years?
You can extend a lease by up to 999 years via the informal lease extension process. The formal process remains set at 90 years. The issue with extending to 999 years is you can only do this with the cooperation of your freeholder and they may use this to bargain for ground rent. If you are negotiating an informal lease extension it can be very helpful to involve an experienced leasehold solicitor.
Many leaseholders are working around this challenge by first purchasing the freehold as a collective and then, with the cooperation of all of the other co-freeholders, informally extending all of their leaseholds to 999 years for zero premium. This is not suitable for all cases and depending on your neighbours it may be better to deal with just one freeholder, than have to reach a consensus with all the other leaseholders.
Free initial leasehold advice
Arrange a free consultation with one of our experienced conveyancing executives on:
- Lease extension.
- Purchasing the leasehold, freehold or share of freehold.
- Selling a leasehold property with a short lease.
- Extending the lease at the same time as you sell.
We specialise in lease extensions and have RICS valuers for the premium/negotiation and solicitors for the section 42 notice and formal or informal extension. Request a tailored quote for:
- RICS Lease Extension Valuation or L2 Homebuyers Survey.
- Serving of the section 42 notice or section 13 notice on the freeholder.
- Negotiation with the freeholder (with the support of your RICS valuer).
- Completion of the legal work, including deed of variation.
- Application to Tribunal to determine the premium.
- Vesting order for absent landlords.
Frequently Asked Questions
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Written by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
Reviewed by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
