When selling a flat with a short lease, it is important to understand what constitutes a short lease and how it may affect your sale.
The Royal Institute of Chartered Surveyors suggests that a lease of 70 years or less is considered “short”.
However, each lender will have a view on what minimum lease length they are willing to lend on, and the general industry standard is a minimum of 80 years.
The length of the lease is important because, as a lease gets shorter, the value of the lease decreases and it becomes more expensive to extend the lease.
When selling a property with a short lease, there are two key things to consider:
- It will only be possible to sell to a cash buyer, due to lenders declining to lend on short leases.
- Any prospective new owner will factor the cost of the lease extension when considering their offer.
This means that short lease properties are typically sold at a significant discount from market value.
As a vendor, this means you have to make a decision as to whether to extend the lease at significant cost to yourself, or sell the property at a discount.
The Lease Advisory Service Lease Extension Calculator provides a rough guide to costs depending upon length of lease and legal costs.
A leaseholder applying under the 1993 Act is liable to pay the landlord’s legal and valuation costs. Leases with 80 years or less unexpired terms incur additional costs as marriage value is payable.
Marriage value is the increase in value of a property arising from the grant of a new lease and is included in the calculation of the premium.
It is advisable to get professional advice from a chartered surveyor and solicitor before embarking on this process.
A common problem is being unable to find the Freeholder. If the Freeholder is missing or does not respond to contact, the process becomes even more complex and costly.
Many leaseholders do not have the necessary funds to extend the lease, and therefore they opt for selling to a cash buyer.
Here at Open Property Group, we specialise in buying properties with short leases. The shortest lease we have ever purchased had 4 years remaining!
In this short video, our M.D. Jason Harris-Cohen explains how Open Property Group purchases a property quickly and with certainty for the vendor:
We will consider any short lease property within England and Wales, in any condition, and with any length of lease. We will also buy a tenanted property with a short lease.
Our solution is the most cost-effective way of selling a property with a short lease. There are no estate agent fees. This type of problem property is often sold at auction, but the disadvantage to that is that you have to wait for the auction date and it can typically cost around £400.00 to £600.00 to register your property for sale with the auction house.
The price you achieve on the day of the auction is very much dependent on how successful the marketing of the property is by the auctioneer, and who is “in the room” on the day of the auction.
There is no guarantee your property will sell on the day either.
So that is why our solution is the most hassle-free and comes with complete certainty of a sale for a property with a short lease.
Watch the video below which explains more about selling your property fast or click here to continue reading this article