Selling a Property with a Short Lease
If you are a leaseholder, you may have often wondered whether it is best to seek a lease extension before selling you property, or whether selling it ‘as is’ will be the best option. Sadly, there is no right or wrong answer to this question. It will all be dependent on the length of the lease still left, as well as the personal circumstances you are currently dealing with.
How long is left on your lease?
Before you consider anything else, you will need to know how long you have on your lease. You want to know that the lease is not too short. The problem is that many people fail to realise that short isn’t actually as short as you may think.
The Leasehold Reform Act will be a great starting point. It tells us that marriage value is payable if there is under 80-years left on the lease. This can be a considerable sum of cash. As a result, the value of a property will fall quite considerably after the 80-year mark. Most people who are looking for properties with a lease will be looking for properties that have 100-years+ left on the lease.
If you have under 80-years left on your lease, you may find that it becomes more difficult to request a lease extension, and to sell your property. After the 70-year mark, it is nigh on impossible to find a buyer for your property if that buyer needs to obtain a mortgage.
The Freeholder
Not all freeholders are looking to provide extensions. You can consider a section 42 notice, but this is out of the scope of this guide.
Perhaps your best bet here would be to contact the freeholder of the property. You can ask how much it costs for an extension. You will then be given your options. It could either be:
The Offer
You will need to hire a surveyor to look at the property before you accept any offer. The freeholder will likely give you a value for lease extension which is higher than your property is worth. You will need to talk to the leaseholder if you disagree with their valuation.
You will also need to consider ground rent. You want this to be as low as possible. The way the current market is heading, it is unlikely that the ground rent will be higher than 0.1% of the value of the property. Although, some freeholders will be higher than this. If you do not agree with the ground rent, you will need to speak to them. You may actually find it difficult to sell your property if the ground rent is too high. Many mortgage lenders will not loan to people who are considering properties with high ground rent.
The Formal Route
You could also consider a Section 42 extension. This could save a considerable amount of cash, but you will only be able to apply for an extension like this in very specific circumstances. Discussing that is out of the scope of this article.
Selling with a short lease
You can actually consider selling your property without extending your lease, although do remember that you will be limiting your options like this. You could contact a company like ours who will provide you a cash offer on a property, no matter how short the lease is left on it. Remember; buyers do not want to be saddled with lease extensions, and mortgage companies do not want to lend to people purchasing properties with a short lease. This isn’t always the best route to go down, but for many, it may be the only option.
Your Personal Circumstances
You will also play a role in the route to go down. Remember; not everybody can wait 6-months for a lease extension. If you need to sell quickly, and you do not have the money to pay for a lease extension, then you may want to talk to us here at Dwellbeing. We can provide you with the options available to you.