Whilst most houses in the UK are bought and sold on a freehold basis, the majority of flats are leaseholds, granted under leases for a fixed term. Most long leases are originally granted for a term of 99, 125 or 999 years and as the remaining term of the lease reduces this can affect the value of the property. Laura Wilkinson from AMD Solicitors looks at the options for extending the term of your lease to improve your chances of selling your flat and increasing its value.
Getting a mortgage on a leasehold property with less that 70 years remaining on the lease term
Although it is possible to get a mortgage on a leasehold property as a general rule it is much harder to do so if there are less than 70 years left on the lease. If you have less than 60 years remaining, few mortgage providers will be willing to lend at all.
Considerations when buying or selling a leasehold property
As a buyer it is vitally important to check how long is left on the lease before viewing a potential new home. As a seller you need to be aware that you could be restricting your pool of potential buyers to just those who can afford to pay cash for the property if there are less than 70 years remaining on the lease term. This often means having to take the property to auction where the price you can get can be unpredictable. This is likely to significantly reduce the sale price of your property because of reduction in competition.
For sellers it is therefore important to realise that allowing your lease to run down can significantly reduce the value of your property. As a general rule, the shorter the period left on the lease, the lower the resale value of the property.
Extending your lease
Getting an extension of the existing lease term is the simplest solution for both sellers and buyers. Under the Leasehold Reform, Housing and Urban Development Act 1993 leaseholders have the legal right to extend their lease by up to 90 years for a flat or 50 years for a house at a “fair market rate”. However, this only applies if they have owned the lease to the property for at least two years. The Leasehold Advisory Services Lease Extension Calculator can give you an estimate of how much it is likely to cost to extend a lease. There are detailed legal requirements and obligations for both the freeholder and leaseholder in following this statutory procedure. Alternatively, you may be able to negotiate with the freeholder a variation of the original lease to extend the term.
Get the right advice
Whether you are a buyer negotiating with a seller to buy a leasehold property or a leaseholder considering beginning proceedings for a lease extension or a leaseholder negotiating with your property’s freeholder for an extension it is really important to get all the legal details worked out correctly. It is therefore highly advisable to use a solicitor experienced in Property Law to handle the details for you.
AMD’s team of Bristol-based property solicitors have been working across the south-west and the rest of the country for decades. Give us a call today 0117 973 5647 and ask to speak to a member of our Residential Property Team, or alternatively please feel free to email Laura Wilkinson, Head of Conveyancing.