Selling a property on a short lease

 

When it comes to selling a property, one of the most frequent questions asked by leaseholders is, "Should I sell my apartment with its existing lease, or should I extend it and sell it with a longer lease?"

It depends on your circumstances, as it does with everything in life, but what follows is some basic guidance that combines that reality with the realities of the property market and the lease renewal procedure itself.

Your Lease's Length:

Your starting point will always be the number of years left on your lease, but what defines a short lease?

The Leasehold Reform Act says that marriage value is due when a lease reaches 80 years, but in practice, sellers in the marketplace are asking for lease extensions on properties for up to 100 years, and sometimes even longer.

There may be lots of bidders for a nice home on a 99-year lease in a booming market. Aside from that, a typical customer will almost definitely consider a discount, no matter how little.

If your lease is longer than 80 years, your prospects of obtaining an informal lease extension for a fair amount and in a short time are considerably greater than if it is shorter.

Your landlord:

Your freeholder's willingness to grant an extension without the requirement to serve a notice (S42) is the second most essential factor to consider.

The easiest way to find out the cost of an informal extension is to write to the freeholder (or their management firm).

When you decided to be selling a property with short ease, you will be instructed to serve notice (at which time your path will be clear), provided with an offer, or requested to pay for their surveyor to advise them so that an offer may be made to you.

The Deal:

Your freeholder's offer will most likely be greater than what your surveyor thinks is fair. Therefore you'll need to think about what aspects are problematic.

Let's start with the duration of the lease. An extension of 99 years (as I said before) is never a good thing. There isn't much of a difference between a 125-year lease and one with a statutory 90-year extension in terms of math and market value.

According to Nationwide, the maximum permissible beginning ground rent on all new construction leasehold properties would be restricted to 0.1 percent of the property's value, which was one of the first major lenders to take action against high ground rentals. Is this the standard by which all future ground rentals will be evaluated?

Selling a property with a short lease:

Instead of attempting to extend your lease before selling a property, you may sell the home with the existing lease in place.

The Act allows you to pass on the right to an S42 lease extension to the incoming buyer. Still, you'll have to take a knock on the price since the buyer will include in the expense of the extension, professional fees, and the overall difficulty and anxiety of having to do it yourself.

Because marriage value is taken at 50% on really short leases, you will be better off overall if you extend yourself, pay the premium yourself, and then sell the home for its full long lease value. If you're unsure, hire a surveyor to give you an estimate.