Leases on Leasehold Property Explained

5th July 2016

A leasehold property is one which is built on land that is owned by a landlord. The owner of the property has a legal agreement in place with the landlord, also known as the freeholder. This legal agreement is a lease.

Most leasehold properties have a long lease but as the years go by, the lease gets shorter. If you want to sell your leasehold property you need to check how long you have left on your lease. This will have a big impact on how attractive your property is to buyers and also on the value of your property.

The Magic Numbers

Any property with less than 80 years left on the lease runs the very real risk of its value dropping. The thought of negotiations, legal fees and lease costs can be a real turn off for a buyer. This is particularly true as the landlord holds most, if not all of the cards.

Another barrier for buyers of leasehold properties with a short lease is that mortgage lenders all have different rules about the length of lease they will lend on. You can see a list of all mortgage lenders and their rules on the Council of Mortgage Lenders website.

Both of these issues can seriously hamper your chances of selling your leasehold property. So what are my options if I want to sell my leasehold property and the lease is short?

Buy the Freehold

Your first option is to try and buy your share of the freehold from your landlord. You could discuss this option with the other owners in your block to see if this is something they would also consider. You will probably have a stronger position in negotiations if you are all together. The law supports this too.

There is a process in place for leaseholders to join together and purchase their freehold called Collective Enfranchisement. This law allows all of the flat owners to buy their share of the lease and then extend their lease to 999 years for free. Even though you are still a leaseholder, owning your share of the freehold along with the other people in your block means there are no tricky negotiations, no additional money to pay to landlords on ground rent and there is no possibility of the value being wiped off your property.

What are the Costs?

You’ll need to pay professional fees to value the property and the existing freeholder’s legal fees. You should factor in any Stamp Duty Land Tax (SDLT) costs too. If the lease extension costs more than £125,000 you will have to pay SDLT. The longer you have left on the lease will mean you’ll pay less than you would with a very short lease left. Some estimates show that you’ll pay £24,000 to extend a 60 year lease but only pay £5,000 to extend a 95 year lease*. You can find a Lease Extension Calculator to work out roughly how much it might cost at the Leasehold Advisory Service.

Extend the Lease

Where your lease is longer than 90 years, you’ll probably not add much value to your property if you try to purchase the freehold.

It might be worth considering extending your lease instead. The usual period of a lease extension of a flat is 90 years. This could be a better option instead of looking into purchasing your share of the freehold.

The shorter your lease, the more expensive it will be to renew but it will add more value to your property. Because of this, you should weigh up the costs to renew the lease vs the amount of money that will be wiped off your property if you don’t renew it.

Do Nothing

You could choose to do nothing and take the hit on the value of the property. You should be aware though that many buyers will find the proposition of buying a leasehold property with a short lease an unattractive proposition. This will either result in no interest in your property sale or a cheeky offer from a potential buyer.

Whatever you decide to do, the most important thing is to get expert advice from a Licensed Conveyancer so you completely understand your options.

Call the Conveyancing team at Co-op Legal Services today on 0330 606 9588 or contact us online and we will call you.

* Source:

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