Do you own a leasehold property? Laura Wilkinson, Property Law Specialist with AMD Solicitors explains how you can take advantage of falling prices to improve the future value of your property.
As we are all painfully aware, the present housing market is a very difficult one. It is therefore more important than ever that you ensure that as far as possible you enhance or at least preserve the saleability and value of your property.
In England and Wales houses and flats are bought either as freehold properties or under long leases.
Most flats are usually bought under a lease for a fixed number of years and once the lease expires the property will revert to the freeholder. The value of the flat will therefore reduce as the number of years remaining under the lease term diminishes. In many parts of the country thousands of properties are affected. Provided however, you have owned your flat or house for at least two years you should qualify to have the statutory right to buy the freehold of your house(enfranchise) or to extend your flat lease by an additional 90 years. This is in fact particularly important if your lease is approaching less than 80 years remaining. Once it falls below 80 years the price payable to extend the lease will increase considerably. In the current market buyers may be put off entirely by a property with a relatively short term remaining under its lease. Mortgage lenders may also be reluctant to lend.
Even if you own your house under a longer lease, the lease may contain restrictions or obligations to the freeholder that you find onerous and from which you will only escape liability by purchasing the freehold.
As prices go down the cost of enhancing the value of your property by purchase of freehold or lease extension may prove more of a bargain. This is because the valuation of the amount payable for the lease extension or the freehold purchase is linked by formula to the value of your property. It is fixed from the time you start the process by serving the relevant notice on the freeholder although the whole process normally take between 6 months and a year to complete. Clearly, if you are of the view that the housing market will recover and prices increase again during that time it would be advantageous to start the process while prices are still depressed.
Even if you are considering selling your property starting the process may be worthwhile. You commence by serving the required initial notice on the freeholder. It is possible after this to assign the benefit of that notice to a future purchaser thereby enabling them to subsequently complete the matter and take the benefit of the valuation. Importantly, this means they do not need to wait until they have owned the property for the two year period before being able to apply themselves.
It is not possible in an article of this length to set out the process in details but legislation lays down the time limits and forms of notice. Valuation of a reasonable purchase price will require the services of a specialist valuer but in the absence of failure to reach agreement upon a figure an application can be made to the Leasehold Valuation Tribunal who will decide the appropriate price.
Whether you are an owner occupier or investor, whether you are planning to sell your property shortly or you are intending to hold onto it for the longer term AMD solicitors can advise you on the process and assist you with necessary legal requirements to enable you to enhance your asset.