Posted on: Wednesday, March 6, 2024
Leasehold homes can pose complex issues when it comes to selling, especially if the lease is considered short. If you’re wondering what your next steps should be as a leaseholder, here’s everything you need to know.
A lease is defined as short by the Royal Institute of Chartered Surveyors if it’s 70 years or less, but some mortgage lenders may set the bar at 80 years. Typically, the longer the lease is on a property, the higher the value it can sell for. Some leases can be as long as 999 years, so it’s important to check the exact length before purchasing one of these properties.
If it’s time to sell your property but the lease is short, you can either extend the lease or find a willing buyer. There are a few reasons why someone may be interested in buying a property with a short lease, for example, retired dwellers may place more importance on finding an affordable place to live than owning an expensive asset. Short leases may also attract certain buy-to-let investors as they will be able to let the property for a set number of years, gaining a healthy secondary stream of income without the cost of becoming a freeholder.
It’s important to note that securing a mortgage on a short-lease property can be very difficult, so you may need to secure a cash buyer instead, which is no easy feat. This is why many people choose to extend the lease before selling
Extending your short lease will make your property more marketable and add to its value. There are several ways to extend your lease, so it’s important to team up with an expert agent who can recommend a solicitor.
Extending your lease informally only takes around 1 to 3 months depending on your circumstances. You will need to negotiate with the freeholder directly, but it should be noted that this option does not come with the statutory protection of a formal extension. You won’t have to put your plans on hold to accommodate this, as conveyancing can be carried out during the lease extension. Extending the lease informally might be a speedy solution to secure a higher price for your home.
Extending your lease formally is a slightly different process, which allows you statutory protection but takes significantly longer. To do this, you will need to instruct a specialist lease extension solicitor and you must have owned the property for at least 2 years. The formality occurs when you must serve your landlord with a Section 42 notice. This will allow you to extend your lease by 90 years, but bear in mind, you will have to wait around 8-12 months for this to finalise.
If you are the freeholder of the property and you wish to sell it, you will likely have to offer the leaseholder the right to buy the property before you’re able to sell it to a third party. This is known as the Right of First Refusal. An agent will be able to help you navigate the challenges that may arise in these circumstances.
If you’re selling with a short lease, get in touch with your local Guild Member for expert advice and guidance. One of our experienced agents will be able to help you establish a fair and accurate selling price and a specialised marketing strategy for your unique property.
For more moving advice, contact your local Guild Member today
