16 Apr Selling a Flat With A Short Lease
Selling A Flat With A Short Lease
Are you able to sell a flat with a short lease? The simple answer is yes, the complex answer is there may be many restraints when you come to sell that ultimately could affect the length of your sale and also the price you could end up receiving.
What is a leasehold property?
Well, a lease is drawn up when you purchase a freehold property This means that you will own the property for the time period stated in the lease. These time periods are normally between 99-999 years when you first purchase your property.
What is a short lease?
A short lease is normally a leasehold property that has less than 80 years remaining on the lease. This sometimes changes when the property is in London and in some cases certain lenders can look to take a view on the number of years on the lease they will take as acceptable. The lowest in most instances used to be around 70 years, however, over the past few years some lenders have made it even more difficult by reducing the amount increase the number of years deemed acceptable from 70 to 80 years.
Lending on a short lease property
The lowest in most instances used to be around 70 years, however, over the past few years some lenders have made it even more difficult by reducing the amount increase the number of years deemed acceptable from 70 to 80 years. There are some lenders that will look to give you a mortgage on a short lease property, however, it is more than likely that you will have to pay a less favourable rate of interest. In the past the cut-off point was usually in the region of 70 years, but since changes in legislation, a number of lenders now consider a short lease as being less than 80 years, as this is the point at which ‘marriage value’ kicks in when applying for a new lease under the terms of The Leasehold Reform, Housing and Urban Development Act 1993.
How much will it cost to extend a short lease property?
This is a how long is a piece of string kind of question we are afraid. You can get a very (and we do mean very) rough estimate from a leasehold calculator however it will not be accurate. There are many variables when trying to get the price of extending your lease so it’s not as simple as just using a calculator. You can ask your solicitor to have a look at if there are any other flats in the block that has recently applied and been granted a lease extension and if so how much they paid. This may give you an idea, however, each lease extension will need to be tailored to your specific property. In order to get an exact cost, you will have to serve a section 42 notice.
What is a section 42?
It is still possible to consider buying a flat with a short lease, but the prospective lender will normally grant a mortgage on the basis that the vendor will apply for a new lease and that the benefit of the vendor’s notice under Section 42 of The Leasehold Reform, Housing, and Urban Development Act 1993 is transferred to the new purchaser at the same time as the leasehold interest in the flat.
How long will it take for you to extend a short lease property?
You will first need to have a surveyor carry out a valuation of your flat and they will need to send the valuation on to your solicitor. After this your solicitor will serve a Section 42 Notice on your landlord/freeholder advising the premium you are willing to pay for the lease extension If your landlord is a company, the Notice must be served at the registered office. If the landlord is an individual and not a company then the address to use will be the one located in your ground rent invoices. The Notice should be served by hand and proof of delivery requested so serving of the Notice cannot be disputed. Once the Section 42 Notice has been served on your landlord/freeholder they have 2 months in which to respond with a Counter-Notice which will either accept or reject your claim and whether the landlord accepts the offer made for the lease premium. If the freeholder will not accept the lease premium that you have offered then the Counter-Notice will also state the lease premium required. There will be a further two month period during which your surveyor and your landlord’s surveyor can discuss, negotiate and conclude the lease premium. If you cannot reach an agreement then either you or your landlord/freeholder can apply to the First-tier Tribunal to make a decision. Normally we find that most lease disputes are sorted out before it gets to the court stage.
Can you sell a property with a short lease under 70 years?
Yes, you can. Everything has an intrinsic value. We have seen properties in London with less than five years go up for sale and sell. Though most high street lenders will shy away from short leases you can find some may be willing to offer to lend against the property. You can also try the conventional way, of selling the property through the open market. It is normally best highlight in your advert that the property is being sold with a short lease market at a price to reflect that. Ideally, you will be looking for a cash buyer to purchase the property and with that in mind, the auction route might be a wise option.