Is a Short Lease Stopping You From Selling Your House or Flat? - National Residential
 

Property News UK

Is a Short Lease Stopping You From Selling Your House or Flat?

WARNING: A PROPERTY WITH A SHORT LEASEHOLD CAN MAKE IT IMPOSSIBLE TO FUND WITH A MORTGAGE AND AN UNATTRACTIVE PROPOSITION TO CASH BUYERS BECAUSE OF THE EXPENSIVE AND COMPLICATED PROCESS TO RENEW A LEASE. THE PROBLEMS CAN DETER BUYERS AND DRIVE DOWN PROPERTY VALUE BY A SIGNIFICANT AMOUNT

In A Nutshell

When a buyer wants (or needs) to buy a property with an extended lease, we make it easy for sellers to extend the lease so they get a better sales price for their property.

To our knowledge, no other estate agent offers this service and as a result, owners of short leasehold properties frequently struggle to sell their properties.

 

Short leaseholds are a major problem if you want to sell your house  – especially in London where the cost to extend a leasehold can be very prohibitive. Short leaseholds start to affect the selling price of the property at about 80 years. The fewer years there are left on a leasehold, the more affect it will have a property sale price.

short-leashold-problem-selling-house

 

According to the Financial Times*, a great way to find bargain properties in London is to look for short leasehold properties because they sell at a fraction of the market value.

 
What’s great for a person buying a short leasehold house isn’t going to be very good for a person selling a short leasehold house – especially as the number of people with the funds to extend the leasehold after the sale drastically affects the competition required to reach 100% of a property’s market value.

Owners of apartment leases that were originally at least 21 years in length can only apply for a 90-year extension after two years’ ownership and the delay and/or uncertainty a new buyer will experience will further affect the selling price of the property so the best option for most people to to buy a property with a short leasehold is if the seller extends the lease before the sale.

Unfortunately, it can be a very complicated business and when the funds required to pay freeholder and solicitor fees required to extend a lease are tied into the property being sold, a lot of buyers have no option than to sell their property at a fraction of the market value to a small fraction of the market.

 

National Residential specialise in selling property with short leaseholds.

We have significant experience of the process and are skilled negotiators so we are better equipped than most other professionals or members of the public to complete the process quickly and efficiently.

 

The Process

Our ’28 Day Fixed Price’ Option

When sellers choose our ‘28 Day Fixed Price‘ option, with the seller’s agreement, we list the property giving buyers the option of buying with a long or short lease.

 
We then take bids for the property with an extended lease from some buyers and bids for the property with a short lease from others. If the reserve is met, we negotiate with the freeholder to work out the cost of extending the lease and then liaise with the seller so they can decide which is the BEST bid they want to accept.

If the best bid is from a buyer wanting a long lease we:

  1. agree (and confirm in writing) a fixed price with the seller (a ‘walk away’ figure with no estate agency fees to pay or any of the legal, freeholder extension fees/costs to pay).
  2. do everything necessary to organise a lease extension including getting the conveyancing and valuations done; negotiating with the freeholder or their solicitors to get the best price possible; organising the contract and liaising with the buyer to agree terms plus any other legal work required as part of the process.

On completion, from the purchase monies deposited by the buyer, we pay: the seller the fixed price agreed; the freeholder the cost of the lease extension; freeholder legal fees; freeholder valuation fees; conveyancing fees; any cash advance made to the seller before completion back to our cash fund; and/or any other fees/costs. We keep any remaining balance.

*By choosing our Fixed Price 28 Day Sale, sellers can also take advantage of our CASH ADVANCE option where we can pay the seller an agreed amount from our cash fund after we have taken a deposit from the buyer (and if there will be sufficient funds to repay the advance on completion). Cash advances under £10,000 do not incur any interest or charge but must be repaid immediately if a sale fails to complete.

 

Extending A Lease Calculator

There are lots of tools available on the internet to calculate the ESTIMATED costs of extending a lease. Although they all should follow the same equation to work out the costs, there are a number of rates (e.g. the yield, relativity and reversion rates) that are subjective to interpretation from the freeholder owner.

Even where the variable rates are restricted to a range by minimum and maximum rates, they can alter the cost of extending a lease considerably. As a result, NONE of the calculators available can predict a reliable figure though they are useful to determine what can be considered reasonable.

An outline of the valuation principles used to calculate the price for extending a lease of a flat under the Leasehold Reform Housing and Urban Development Act 1993 can be found here and a leasehold calculator with the option to change the variable fields can be found here.

The following simple calculator is provided by My Leasehold, Chartered Valuation Surveyors.

 
NB. In addition to the cost of buying the extra years on the lease, other costs can include: legal advice/work completed by your solicitor, a lease extension valuation report (completed by a surveyor), the freeholder’s legal and valuation costs (which the leaseholder is required to pay) as well as Land Registry fees.

 
Our ‘7 Day Cash Purchase’ Option

Alternatively, if you would like to sell a short leasehold property as fast as possible, you might be interested in what our 7 Day Cash Purchase Fund. We will buy the property for a discounted price agreed in writing in advance of the sale and deposit the full amount in your bank within 7 days. All legal costs and fees are paid by us so the figure we agree is the walk away sum.

 

Phone us on 0800 612 8659 to discuss ways that we can help you avoid a repossession order or send us your details using our contact form 24/7 and we will phone you back ASAP in office hours (or at a time to suit you).




National Residential logo icon The On-line National Residential Agency: Best Price Possible & Quickest Sale - guaranteed

Contact Us

Get A Better Price By

Extending The Lease

Find out how we can help you
get the best price for your property.
Data Protection Act
Registered Controller
No. ZA081795



National Residential properties
sell your house for 100% of market value in 28 days

Sales Enquiries:

Tel: 0800 612 8659  (24/7)

Office Hours

  • Monday-Friday: 9am - 8pm
  • Saturday: 9am - 1pm


Just A Few of The Places We Advertise

National Residential trustscore on Trustpilot
National Residential Google Reviews
Arrange A Callback