How to sell a flat with a short lease?
How to sell a flat with a lease below 80 years.
There are many reasons why you might want to sell a flat when the lease is below 80 years. It might be you’re about to sell your flat, but you’ve been unable to extend the lease and are now caught in a bind where you must sell quickly. Perhaps you’ve located a buyer who is prepared to buy the home if the lease can be extended. In either case, it’s important to know what your options are and how much it will cost to sell your flat. We’re going to look at and discuss some of the best ways to sell a flat with a short lease.
We’ll also look at the costs involved and how professional property-buying companies can help make the process easier for you.
Let’s start from the beginning, what is a lease?
A lease is a contract between you and the freeholder (the owner of the property) that gives you the right to live in your home for a set period.
The length of the lease term can vary, but most leases are granted for a term of 99 years. Once the lease expires, you will no longer have the right to live in the flat. You might be lucky and find leases with 999 years on.
When we can talk about a short lease?
A short lease is a lease that has less than 80 years remaining on it. If you’re looking to sell your flat, it’s important to be aware that shorter leases can make the property much harder to sell. It can also devalue a property, mostly this devaluation is to help cover the costs of any lease extensions. The exact cost that a lease decreases the market value of the property will vary but should be expected, estate agents will often struggle in selling a leasehold property.
Most buyers will be reluctant to purchase a property with such a short lease term. On portals like Rightmove or Zoopla properties with a short lease will usually have a postscript ‘cash buyers only’ as it is not possible to get a mortgage on such a short lease flat.
Can I extend a short lease?
If you want to sell your flat but the lease is short, you may be able to extend the lease.
This can be a costly and time-consuming process, so it’s important to get professional advice before proceeding. You will need to negotiate with the freeholder and reach an agreement on the terms of the extension. This will also involve using a conveyancing solicitor which will also add additional costs to the process.
How to check how long is left on the lease?
You should have all the details in your documents pack but if they are stored away safely, there’s an option to check on the government website The only downside is that it costs £3.
The cost of lease extension
The cost of extending a short lease can vary depending on several factors, including the length of the remaining lease term, the value of your flat, and whether or not you have the right to buy the freehold.
Valuation of the property by an RICS surveyor
Negotiation with the landlord to renew lease
Remember that the best way is to serve section 42, meaning that you formally ask to add 90 years to the lease and that also takes away the ground rent, otherwise if the freeholder is not cooperative, he/she may change their mind at any stage, causing you a big financial loss.
Agreeing on the terms of the new lease with the landlord
Figure out the marriage value
What is a marriage value
It is the increase in the value of a property that is due to the extension of a lease. The landlord is entitled to 50% of this increase.
It means that if the property now is worth £150k and after the lease extension RICS surveyor valued it at £190k the marriage value is £40k so you will need to pay the landlord 50% of that so £20k
There are 2 conditions to extending a short lease property
- You’ve owned the property for at least 2 years
- The original lease granted was for a term over 21 years
If you’re unable to extend the lease, or if you don’t want to go through the hassle and expense of doing so, there are other options available to you.
One option is to sell your flat to a professional property-buying company.
The total cost is made up of 5 parts:
1. Lease extension premium (mostly fixed – around £5k ) payable to the landlord for the new lease
2. The legal fees associated with the process of extending the lease on your side
3. The legal fees on the freeholder’s side
(legal fees may range between £4k-£7k)
4. Marriage fee
5. Stamp duty, when applicable
- you may not have the budget
- you may not be able to find the freeholder (then you need to apply for a vesting order)
- the freeholder may not be willing to negotiate to renew lease (take the formal route serve section 42)
- to resolve any disputes you may need to apply to a First-tier Tribunal
If you realise that either extending your lease is too expensive or not something you want to do, we have an alternative solution for you.
A cash buyer: A cash buyer is a company that quickly buys property without any hassle.
Speed Property Buyers is a professional buying company. We offer free initial advice, call us to figure out if we may help you.
It’s a very cost-effective way of moving on. Speed Property Buyers will give you an estimate quickly (all completely free) so you will have time to decide if this route is the right option for you. What makes us stand out – we will cover all the legal costs.