Is It Hard to Sell a Leasehold Property?
Selling a leasehold property can be a bit more complicated than selling a freehold property. However, usually you will only need to collect more pieces of paperwork and do some more planning. If you’re properly prepared, selling a leasehold property can be quite straightforward.
In our guide, we’ll explain what a leasehold property is, and what you need to know so you can sell your leasehold property.
What is a Leasehold?
If you own a leasehold property, you own the property but someone else owns the land that the property is on (which is the freehold). Most flats and some new builds in the UK are leaseholds.
There will be an agreement for the leaseholder to live in the property for a set period of time, and the leaseholder will have to pay ground rent and a service charge to the freeholder. For this charge, the freeholder usually takes responsibility to maintain communal areas, like shared gardens and the building.
Your lease will usually contain a number of things that stipulate how you’re allowed to use the property. For example, it might say that you’re not allowed to own a pet, or it might say that the leaseholder has to take charge of the maintenance of certain things in the property.
Leases will usually last for 99 years, although some can be as long as 999 years. Once the lease is finished, the property will transfer back to the freeholder. However, leaseholders will usually extend the lease before this happens. If a leaseholder has held the lease for two years or more, they have a statutory right to extend the lease.
How Can I Sell a Leasehold Property?
When you sell a leasehold property, the lease is transferred to the new leaseholder. So, they will have to adhere to everything that was agreed to in the original contract, including paying the ground rent and service charge.
The general process for selling a leasehold property is similar to freehold. You probably want to appoint an estate agent to market and sell your home. You’ll also need to appoint a solicitor to deal with conveyancing.
Once an offer has been accepted, your solicitor will prepare a contract of sale and distribute it to the prospective buyer. They will also need to send a copy of the lease agreement as well as a copy of your title and the freeholder’s title.
The buyer might also request to see an information pack from the property managing agent. You might have to pay a fee for this to be produced. The delivery of this pack often causes a delay in selling leasehold properties, so you will need to be proactive and chase up your managing agent.
You might also have to provide a copy of the building’s insurance schedule and the annual accounts for the managing agent. If you’re a shareholder of the company that manages the block of flats, you’ll need to provide details to your solicitor, which can include your shareholder’s certificate.
Once your buyer has all the required information and is happy to complete the sale, the freeholder will be formally notified that the lease has been transferred.
What Can Go Wrong with Selling a Leasehold Property?
Luckily, most of the issues that can arise when selling a leasehold property are easy to fix.
If your lease has less than 80 years left, a buyer will find it harder to get a mortgage on the property. This can then negatively impact the value of your property or reduce the likelihood that you’ll be able to find a buyer.
If you have 80 years or less left on your lease, it becomes more expensive to extend it. After this time, the freeholder takes 50% of the property’s marriage value, which is the amount of extra value that will be added to the property with a lease extension.
It’s best to extend your lease before it gets to 80 years. The good news is that once the formal request for a lease application has been submitted, the time will pause until the extension application is complete. So, you can apply at 83 years and not have to worry about time ticking down to below 80 whilst the application goes through.
With some leasehold properties, the ground rent will double every ten years. This can put off potential buyers and also make mortgaging difficult.
To fix this issue you can extend the lease, even if you have plenty of time left. So, you can add 90 years to the lease at a ‘peppercorn rent’ which means you don’t have to pay ground rent. You can do this because there has been a leasehold reform that puts restrictions around ground rent on freeholders.
What to Consider When Selling a Leasehold Property
If you’re selling a leasehold property, you’ll need to consider whether the costs involved with extending the lease are worth the value it will add to the property.
You should also always make sure you have as much information as early as possible in the sales process. This way you can quickly answer any questions that the buyer may have around the lease, the service charges, and the ground rent. This will help to ensure a quick sale.
If you’re looking to sell your house fast, SOLD.CO.UK are property experts with experience selling both leasehold and freehold properties. We specialise in getting you a quick sale, using our network of pre-approved cash buyers. Not only that, but we can also sell your house for free and will even cover your legal fees. Get your free valuation today, or contact us to speak to one of the team.