For many leasehold homeowners the last time they thought about the length of the lease on their property was when they purchased it. And, ever since that date, the lease has been ticking down…
So, why is this an issue when selling a property?
Mandy Bourchier, Branch Manager of Brown & Cockerill Estate Agents explains.
“Selling properties with a short lease can be problematic for sellers as it can affect the value of the property as well as limit the potential buyers. Leases with less than 80 years remaining can cost substantially more to extend than those with more than 80 years remaining. Mortgage lending can also be problematic, with leases of less than 70 years you may have to limit yourself to cash buyers and look at alternative selling methods such as auction. In almost all cases, the seller will more than likely need to accept a lower price than would normally be expected with a longer lease.”
Can the lease be extended?
“Under the 1993 Leasehold Reform Act, most leaseholders are legally entitled to get 90 years added to their lease providing they have owned the property for more than two years. The good news is, this Act can also oblige the freeholder to reduce the ground rent to nil”. If you do not qualify under the Act, whilst you cannot compel your freeholder to extend the lease there are options and in this circumstance it is advisable to seek advice.
So, what are your options if your lease needs extending?
Providing you meet the requirements of the Leasehold reform Act you can:
Option One: Extend the lease before you sell. The sooner you do so, the cheaper it will be and when you come to sell, you should be able to achieve the maximum sales price and not accept a fall in value.
Option Two: Start the lease extension process now so the new owner can continue with it. As they will not be able to extend the lease themselves until they have owned the property for two years, this may give you a stronger negotiating position when accepting offers.
Option Three: Sell the property with a shorter lease. However, bear in mind that you may need to sell at a lower asking price or sell by auction.
Whichever option you decide to choose, Brown & Cockerill will be able to help. Our full range of services offer advice on completing and/or financing a lease extension as well as choosing the right method of sale for your property. For more information on how Brown & Cockerill can help contact 01788 551111.