Selling a short lease flat?
Guide to selling a short lease property…
How do you sell a property with a short lease?
This article is designed to provide owners of leasehold flats with information about selling where the lease remaining is 80 years or less.
Last updated by Mark Grantham on 2nd August 2017
Most flats in England and Wales are owned on a lease basis. Leases typically begin with either a 99 or 125 year term, although some are 999 years – known as a virtual freehold. As time goes by the term of the lease decreases, when the lease term has 80 years unexpired it will become difficult to sell compared to leases with longer terms.
Short lease flats are generally not liked by mortgage lenders because they don’t provide them with enough security.
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The value of a flat decreases as the lease term decreases below 80 years. If the lease for your flat is 80 years or less and you’re considering selling then you should consider exercising your right to extend your lease if you want to achieve a good sale price. You have the right to extend your lease if you’ve owned your flat for at least 2 years.
When selling a flat with a short lease, rather than paying to extend the lease before the sale, it’s more common to assign the right to extend the lease to the new buyer. There are two ways to do this:
Option A – This quick and low-cost route is often the preferred method when selling at auction. The current owner of the lease agrees to serve a Section 42 Notice to the landlord/freeholder to acquire a lease extension and to assign the benefit of the Notice to the buyer upon completion. As long as there aren’t too many complications an experienced solicitor will charge about £500 for serving notice to the freeholder – that’s a small price to pay, as the benefit will greatly assist the saleability. The new buyer will be able to commence the lease extension process immediately, rather than waiting to own the property for 2 years.
Option B – Some buyers, particularly those purchasing with a mortgage may find option A too uncertain because the lease extension premium (the cost to extend the lease) has not been agreed by the landlord. This longer and more expensive route involves the seller obtaining a professional valuation to determine the premium payable to the freeholder for a lease extension of 90 years added to the current unexpired term.
It’s worth obtaining further independent advice to see what route is best suited to your circumstances. There is a free service available to lessees (lease owners) that’s worth contacting, they offer good telephone support: The Leasehold Advisory Service
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