London buyers often focus on the visible parts of a property.
The postcode. The view. The interior finish. The price per square foot. The building entrance. The distance to the nearest station.
All of those things matter.
But for leasehold flats, two less glamorous numbers can have a larger impact on the real value of the asset: the unexpired lease term and the annual service charge.
These two numbers affect mortgageability, resale liquidity, net yield, holding cost, negotiation position and long-term capital preservation.
They are also two of the numbers most buyers underweight.
That is especially true for overseas buyers entering London from markets where leasehold ownership, service charges and ground rent structures may be less familiar.
In London, a flat is not only a price and a location. It is a lease, a building, a management structure and a long-term liability profile.
The best buyers understand that before they offer.
1. London flats are often leasehold assets
Much of London’s flat market is leasehold. That means the buyer owns the right to occupy the property for the remaining term of the lease, rather than owning the land and building outright in the same way a freeholder would.
This is normal in London. But normal does not mean simple.
The lease sets out the buyer’s rights and obligations. It can affect use, alterations, subletting, service charge liability, ground rent, insurance, building management and the process for extending the lease in future.
For overseas buyers, this can be unfamiliar. In some markets, buyers think of an apartment as a straightforward freehold-style asset. In London, the legal and management structure matters just as much as the apartment itself.
A buyer who ignores the lease is not buying with full information.
2. Lease length affects value and liquidity
The unexpired lease term is one of the most important numbers in any London flat purchase.
A long lease can support confidence, mortgageability and resale liquidity. A shorter lease can create cost, uncertainty and a narrower buyer pool.
The key threshold buyers often hear about is 80 years. When there are 80 years or less remaining on a lease, the cost of extending it increases significantly. That is why buyers, lenders, valuers and solicitors pay close attention to the remaining lease term.
A flat with 999 years remaining and a flat with 78 years remaining are not the same asset, even if they are in the same building and look identical inside.
The shorter lease may still be worth buying. But only at the right price, with the right advice and a clear understanding of the extension route.
3. The 80-year threshold should not be treated casually
Some buyers see a short lease as a negotiation opportunity. Sometimes it is. But it can also be a trap.
Below 80 years, the cost of extending a lease can become materially more expensive. Buyers may also face a smaller mortgage market, weaker resale demand and more complicated negotiations.
A short lease affects more than the purchase price. It affects lender appetite, valuation, resale liquidity, future extension cost, the buyer pool at exit, negotiation risk, legal timing and holding strategy.
A cash buyer may think they can ignore this because they do not need a mortgage. That is a mistake. Even if the buyer purchases in cash, the next buyer may need finance. If the lease length limits mortgageability, it can reduce exit liquidity.
In London, the exit buyer matters from day one.
4. Leasehold reform helps, but it does not remove the need for underwriting
Leasehold reform is changing the landscape. The Leasehold and Freehold Reform Act 2024 is intended to make lease extensions and leasehold ownership fairer, but buyers should be careful because not all provisions are fully in force and implementation remains important. Although the Act has received Royal Assent, the majority of its provisions are not yet in force and many require further consultation or secondary legislation.
That matters for buyers. Reform does not mean every leasehold risk has disappeared. Implementation, timing, valuation method, building structure, landlord behaviour and professional advice still matter.
A buyer should not purchase a short lease simply because reform is expected to improve the position. The safer approach is to underwrite the asset based on what is legally available today, then treat reform as upside if it improves the position later.
That is especially important for overseas investors who may not be able to monitor every regulatory change closely.
5. Service charge is the second purchase price
Service charge is often treated as an afterthought. It should not be.
For leasehold flats, the service charge is the annual cost of maintaining, managing and insuring the building and its communal areas. It may cover items such as cleaning, lifts, concierge, gardens, heating systems, building insurance, repairs, managing-agent fees and reserve funds.
For buyers, the practical issue is simple: a high service charge reduces the real return and can affect resale value. A flat advertised at a reasonable price may be much less attractive if the service charge is excessive, rising quickly, poorly explained or out of line with comparable buildings.
Service charge is not just a running cost. It is part of the valuation.
6. High service charges can damage net yield
For investors, service charge directly reduces net yield. A gross yield can look acceptable until the service charge is included.
Example: a flat rents for £36,000 per year. The purchase price is £750,000. The gross yield is 4.8%. But if the annual service charge is £7,500, before management, maintenance, voids, tax and financing, the income position changes immediately. The service charge alone consumes more than 20% of the gross rent.
That may still work if the asset has strong capital preservation characteristics, low vacancy risk and excellent liquidity. But it cannot be ignored.
For investors, the question is not: What is the gross yield? It is: What is the net yield after service charge, ground rent where applicable, management, maintenance, voids, financing and tax? That is the real number.
7. Service charges are rising across the market
Service charges have become one of the most sensitive issues in the London flat market. Budgeted service charges for 2026 rose by 6.3% compared with 2025. London had the highest average service charges in England and Wales, with the average charge at £2,801 per year in 2025, up 6.4% year-on-year and 64.5% over the previous decade.
This does not mean every service charge is unreasonable. Some buildings genuinely cost more to run. A development with lifts, concierge, gym, pool, underground parking, landscaped gardens, complex fire systems and high insurance costs will naturally have a higher annual charge than a small period conversion.
The issue is not simply whether the number is high. The issue is whether it is justified, transparent, predictable and proportionate to the asset.
8. Amenities are not free
London buyers are often attracted to amenity-rich buildings. Concierge. Gym. Cinema room. Residents’ lounge. Co-working space. Landscaped gardens. Lifts. Underground parking. Wellness facilities.
These amenities can improve lifestyle, tenant appeal and rental demand. But they are not free. They are funded through the service charge.
For a resident owner, that may be acceptable if the amenities are genuinely used and support the quality of life. For an investor, the calculation is more disciplined.
The buyer needs to ask: Do these amenities increase achievable rent? Do they improve tenant retention? Are similar buildings charging the same? Is the service charge stable? Is there a reserve fund? Are major works expected? Is the building efficiently managed? Would a future buyer accept this cost?
A beautiful lobby does not automatically justify a weak investment case.
9. Overseas buyers often underweight the management structure
Overseas buyers may focus heavily on location and presentation. That is understandable. But in London leasehold property, building management can make or break the ownership experience.
The buyer should understand: who the freeholder is; who the managing agent is; whether residents control management; whether there is a reserve fund; whether major works are expected; whether there are cladding or building safety issues; whether service charge accounts are available; whether insurance costs have risen; whether the building has disputes; whether subletting is permitted; whether short letting is prohibited; whether pets, alterations or works require consent.
A strong flat in a weak building can become a weak investment. A slightly less glamorous flat in a well-managed building can be a better long-term hold.
10. Lease length and service charge affect resale
Buyers often think about entry price. They should also think about exit.
A future buyer will ask the same questions: How long is the lease? What is the service charge? Has it increased? Are there major works? Is the building well managed? Is the asset mortgageable? Is the net yield still sensible? Is there a large enough buyer pool?
If the answers are weak, the seller may have to discount. This is why lease length and service charge are not technical details. They affect liquidity.
In a strong market, buyers may overlook them. In a selective market, they become decisive.
London today is not a market where buyers can rely on sentiment alone. The best assets need to survive scrutiny.
11. What EGRE checks before recommending a flat
Before recommending a London flat to an investor or overseas buyer, EGRE would want to understand:
Lease position. Unexpired lease term, ground rent, extension rights, restrictions and any unusual clauses.
Service charge. Current amount, recent history, budget, reserve fund, insurance, expected increases and comparable buildings.
Building management. Managing agent, freeholder, resident control, maintenance standards and dispute history where known.
Letting position. Achievable rent, tenant depth, restrictions on subletting and expected void risk.
Resale liquidity. Likely future buyer pool, mortgageability and whether the asset appeals beyond one narrow group of buyers.
Total holding cost. Service charge, ground rent where applicable, council tax, utilities, management, maintenance, tax and financing.
Exit risk. Whether the asset remains attractive if the market becomes more selective.
This is not overcomplication. It is proper underwriting.
12. The buyer checklist
For buyers considering a London flat, the minimum questions should be:
How many years remain on the lease? Is the lease above or below 80 years? What is the current ground rent? Can the lease be extended? What is the annual service charge? How has the service charge changed over the last five years? What does the service charge include? Is there a reserve fund? Are major works expected? Who manages the building? Are there any building safety or cladding issues? Is subletting permitted? Is short letting prohibited? Is the property easily mortgageable? Would a future buyer accept the same cost profile?
If the buyer cannot answer these questions, they are not ready to proceed.
EGRE view
In London, the real price of a flat is not only the asking price. It is the asking price plus the lease risk, the service charge profile, the building condition, the management quality and the exit liquidity.
Lease length and service charge are not administrative details. They are valuation inputs.
A flat with a weak lease or excessive service charge may still be worth buying, but only if the price reflects the risk. A flat with a strong lease, sensible running costs and good management may deserve a premium because it is easier to finance, easier to let, easier to hold and easier to resell.
For overseas buyers, this matters even more. They are often buying from a distance, relying on advisers, and comparing London against markets with very different ownership structures.
The right London flat is not just the one that photographs well. It is the one that can survive due diligence.