How many years left on a lease is too short for a mortgage?

How many years left on the lease is too short?

There is no single number, and the number people quote — 85 years — is a summary of a rule rather than the rule itself. Most lenders state a minimum number of years that must remain <i>at the end of the mortgage term</i>, which means the answer depends on how long the mortgage is as well as how long the lease is. A term that is comfortable for a 25-year mortgage can be short for a 35-year one on the same flat.

From the e-ROT archive

This scenario is drawn from Report on Title material dealing with this specific circumstance.

Lexsure master Report on Title paragraph: Lease Term - More Than 85 Years But Less Than 125 Years · See the wording

Where the commonly quoted figures come from

The Lexsure master wording states that most mortgage lenders require at least 85 years remaining, and separate wording records that an increasing number require 87. Both figures are real; neither is a rule of law, and neither is a survey of the whole market on the day you read this. They are what the professional wording records about lender practice at the time it was written.

Treat them as the shape of the answer rather than the answer. The useful question is not "is 85 the number?" but "what does the lender on this purchase require, and what will a buyer’s lender require when I sell?" — and those have documented answers for any particular lender.

The reason the figures cluster in the eighties is arithmetic rather than tradition, and it is worth understanding because it tells you how the number will move.

Why the threshold moves with the mortgage

Most lenders do not say "the lease must have 85 years left". They say something closer to "a minimum of 50 years must remain at the end of the mortgage term". Those are different rules that happen to coincide at one mortgage length.

Work it through. On a 25-year mortgage, a 50-year-after-the-term requirement needs 75 years now. On a 35-year mortgage it needs 85. First-time buyers increasingly take mortgages longer than 35 years, and when they do, the same lender applying the same unchanged rule needs a longer lease than it needed from the previous buyer of the same flat.

That is the mechanism behind the sense that the goalposts keep moving. Some of the tightening is lenders changing their requirements, and they have been; but some of it is borrowers taking longer mortgages against a rule that was always expressed relative to the mortgage term.

A long lease today, and a long ownership

The master wording covers the case that gets overlooked: a term of around 120 years is comfortably acceptable to the great majority of lenders, and the honest report says so. But it also says what happens if you hold the flat for a long time.

A lease loses a year every year. A 120-year term is 85 years after 35 years of ownership, and at that point a buyer needing a mortgage starts to have the problem you did not have. Nobody can tell you today what extending will cost then, which is precisely why the point is reported now rather than left to be discovered.

If you do not expect to own the flat for that long, the master wording’s conclusion is equally plain: the lease term is unlikely to pose a problem for you. Both halves of that are part of an honest answer.

Finding the requirement that actually applies

Minimum unexpired term sits in the lender-specific part of the Lenders’ Handbook rather than the instructions common to all lenders. There is no general rule to fall back on: if the requirement is not in that lender’s own answers it does not apply, and if it is, it governs.

Read the form of words as well as the number. "85 years remaining" and "50 years remaining at the end of the mortgage term" produce different answers on the same flat, and the second form is the more common. Some lenders state both a floor and a term-relative rule and apply whichever is longer.

The requirement that matters on a sale is the buyer’s lender’s, not yours, and you will not know who that is. The practical hedge is to know where the lease sits against the range of current requirements rather than against one of them.

Research lender requirements → Lexsure Lender Archive

Lease Term - More Than 85 Years But Less Than 125 Years

Master precedent Lexsure e-ROTScope Acceptable term, long ownershipWord count 117Status Current master paragraph

The remaining term of the lease is currently 120 years which is generally acceptable to the majority of mortgage lenders. Most mortgage lenders require the remaining term of a lease to be at least 85 years. Whilst the remaining term of the lease for this Property is currently 35 years off this requirement, we feel it prudent to inform you of the below which may apply to you should you own the Property for a long period of time. Should you own the Property for a long period of time and the lease term reduces close to or below 85 years, you might experience difficulty in selling the property especially if a buyer requires a mortgage. …

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