Life Easier for Leaseholders as Two-year Rule is Scrapped

There’s been a big change in the property market that will have a big effect on leaseholders – whether you already are one or if you’re about to become one. The government has just scrapped the rule which forced homeowners to wait for two years before they could extend their lease.

How does the change work?

Up until January 31 2025, if you bought a leasehold property, you couldn’t extend the lease or buy the freehold for two years, which was a common problem for buyers and for sellers.

Now, however, this waiting period is no longer in existence, allowing new homeowners to extend their lease or buy their freehold immediately.

Good news for buyers

The older system meant that if your new property had a shorter lease remaining, you had to wait an additional two years before you were able to do anything about it.

This two-year waiting period would see your lease getting shorter, making your property worth less but making it harder to mortgage. Since January 31, you can:

• Apply to extend your lease as soon as you’ve bought the place
• Not worry about your ever-decreasing lease length
• Make more plans to renovate and sell further down the line
• Get better mortgage deals

Good news for sellers

Selling your leasehold property just got a bit easier, as buyers will find it more attractive now they can extend the lease as soon as they’ve completed.

• Buyers can act immediately on the lease
• Your buyer’s mortgage lenders will find your property a better prospect
• Your marketing specs will look much better
• Sales should be that little bit smoother

Why is lease length so important?

Lease length is very important when you have one. Once a lease length falls below 80 years, it’s more expensive to extend it due to so-called “marriage value”.

A property with a longer lease is worth more than one of a similar spec with a shorter lease. The difference between the two values is the marriage value and when your lease falls below 80 years, you have to share 50% of this amount with your freeholder when you extend.

You can see how being able to extend your lease immediately could save you money.

What you should do now

These changes may well affect buying and selling plans, so here’s what you should do.

If you’re buying a leasehold property:

• Check the current lease length before you buy
• Factor in any extension costs you might need to pay
• Get advice from a solicitor

If you’re selling a leasehold property:

• Understand your lease length and its terms
• Work out how the recent changes might help you to sell
• Think about extending before you sell to attract more buyers