Selling a leasehold property – what you need to know
If you own leasehold property and want to sell it, it’s important to understand about leases before you start. In this blog, I run through the key things you need to know about selling leasehold property
What’s the difference between freehold and leasehold?
If you’re lucky enough to own freehold property, it’s all yours until either you sell it, it gets demolished or the world ends, whichever comes first. However, if you own leasehold property, you only own it until the lease runs out. After that it reverts to the freeholder (landlord).
From a selling point of view, this means that you must take the length of your lease into consideration when you’re putting your property on the market as it may affect your ability to sell the property.
Selling leasehold property
In general, selling leasehold property is not much different from selling freehold property. Offers are still made and accepted, mortgages are still taken out and contracts are exchanged and completed.
However, if your property has between eighty and sixty years left of its lease, it may be difficult to sell. Firstly, this is because buyers don’t want to run the risk of either becoming tenants in their own homes, or finding themselves with property that turns out not to be an investment at all. Secondly, most mortgage lenders simply won’t lend money for the purchase of a property that has less than sixty years lease left. This is because it is a bad risk – if the bank has to repossess a property with a short lease, they won’t be able to sell it and recoup their losses.
I have eighty years left on my lease – what should I do?
The eighty-year mark is the point at which most homeowners choose to extend their lease. You would usually pay to have it extended by another ninety years, taking the total up to 170 years. A short lease can adversely affect the price you get for your property when you sell; extending it will bring it back up to the right selling price for its type and location. The better price you’re likely to receive for your property usually offsets the cost of paying to extend the lease.
However, do remember that extending leases is a costly exercise. If your lease still has about ninety years left, it isn’t usually worth the cost of extending it – you won’t see a corresponding rise in the price you get for your house, and it won’t benefit you as you’ll be moving out.
It’s important to bear in mind that extending the lease will also hold up the sale of the property, so it’s a good idea to plan ahead and extend the lease before you put the property on the market. Extending a lease is a process usually carried out by a solicitor or conveyancer – you can simply use the same one as you are using for the sale of your house.
If you have property to sell in East London or Hertfordshire but you’re worried about the length of your lease, please give me, Adam Dockley, a call on 020 3633 4440 to discuss your needs.
PS – you can find out more about freehold and leasehold properties here.