Savvy buyers are snapping up homes with short leases at bargain prices, but experts warn of hidden costs.

Analysis by Open Property Group has revealed that flats with leases under 80 years are selling for an average of £36,000 less than similar properties. That’s a hefty 12% discount!

But before you rush out to grab a bargain, it’s important to understand why these flats are so cheap.

Lease Extension Costs Can Add Up

The biggest issue with short leases is the cost of extending them. This can set you back £5,000 to £38,000, depending on factors like how much time is left on the lease and the ground rent.

And that’s not all! You’ll also need to factor in:

• Valuation fees: to determine the cost of extending the lease.
• Legal fees: for solicitors to handle the process.
• Section 60 costs: payable to the freeholder.
• Stamp duty: if the total cost of the extension exceeds £125,000.

Regional Variations

The discount on short lease properties varies across the country. Here’s a breakdown of the average savings:

• South East: £52,000
• East of England: £46,000
• West Midlands: £44,000

The South East is also the current hotspot for short lease properties, accounting for 30% of the national total, followed by London (19%) and the East of England (16%).

Proceed with Caution

Jason Harris-Cohen, chief executive of Open Property Group, warns that “a short lease can be the stuff of nightmares.” He advises sellers that a short lease will likely mean accepting a lower sale price to attract buyers.

Labour Promises Action

The good news is that Labour has pledged to make it easier and more affordable to extend leases.

The Bottom Line

A short lease property can seem like a tempting bargain, but make sure you factor in all the potential costs before you buy. It’s crucial to get expert advice from a solicitor and surveyor to avoid any nasty surprises further down the line.