It is estimated that there are around 4.86 million leasehold properties in the UK. This accounts for 20% of the nation’s housing stock.
If you’re one of this 20%, you may be asking yourself, how hard is it to sell a leasehold property?
The short answer: selling a leasehold property is harder than selling a freehold property.
In this guide, we help you understand what a leasehold property is and what you need to know about selling your leasehold property.
What is a leasehold property?
A leasehold property is property that sits on land owned by a third-party.
This third-party is known as the freeholder, while the person who owns the property is known as the leaseholder.
As the name suggests, a lease exists to allow the property owner to have property on the freeholder’s land. This lease can be for any length of time, up to and including 999 years.
What happens when leases end?
Now, 999 years may seem excessive. However, this would be a blessing for a property owner. Once a lease term ends, the land (and any property on it) would be returned to the freeholder, even if the freeholder had paid off their mortgage.
Because of this, there is a clear agreement drawn up to outline any responsibilities between the parties. This will also outline the fees that need to be paid by the leaseholder.
Leaseholder fees
As you don’t own the land the property is on, you’ll rent the land your property is on from the freeholder, a fee known as ground rent.
You may also have to pay a service charge, maintenance, and a share of the building’s insurance. The lease is binding, so if the terms weren’t adhered to, the contract would be forfeited, and you would be forced to leave.
Can you sell a leasehold property?
Yes, you can sell a leasehold property — but you’ll have to get organised first.
When you sell a leasehold property, the lease goes with it. This can benefit you, as leaseholds can cause flats to increase in value.
The new owner of the property will also have to honour (and adhere to) everything that was in the original contract, including fees and other stipulations.
For the most part, the process for selling a leasehold property is like selling a normal property. You’ll most likely appoint an estate agent to sell your home, and a solicitor to deal with the conveyancing.
Once you’ve had an offer accepted, your solicitor would prepare a contract of sale for the prospective buyer.
The only difference is that they would also send the lease agreement and a copy of both your title and the freeholder’s title. You may also have to provide the building’s insurance schedule and annual accounts for the managing agent, but this will vary on a case-by-case basis.
Once the buyer has received all the above and is happy to proceed, the freeholder is formally notified that the lease has been transferred.
Is it hard to sell a leasehold property?
There’s no straight answer to ‘is it hard to sell a leasehold property’, but there are things that need to be considered when you buy one.
Potential buyers will weigh the usual pros and cons of buying a flat. But there can be a few potential issues that can put them off a leasehold property, such as:
1. Length of lease
If you have a lease with less than 75 years remaining, then selling the property can be difficult.
Properties with a short lease make it notoriously hard to get a mortgage. Most lenders refuse to lend on properties with a short lease. In this scenario, you’re looking for a cash buyer – however, these aren’t always easy to find.
2. Property condition
This isn’t unique to leasehold properties. It’s universal when it comes to selling any home. Having your leasehold property in a good condition will simply make it a more appealing prospect to most potential buyers.
3. Lease terms
Any buyer who is considering buying a leasehold property should have a solicitor go through the terms of the lease closely.
Particular attention will be paid to:
- Ground rent terms
- The cost of the service charge
- Building insurance
- Any terms impacting the sale of the property in the future.
If any of these don’t look desirable, it goes without saying the property will be harder to sell. Potential buyers can then renegotiate the price or pull out of the sale altogether.
Things to consider when selling a leasehold property
Research from the National Association of Estate Agents found that 94% of leasehold owners regretted their decision to buy.
In fact, many feel homes were mis-sold to them…
But this often comes from a lack of understanding around leasehold properties and the difficulties they may face when it comes to selling.
If you’re looking to sell a leasehold property, ensure you have as much information as early as possible in the process. Buyers will have questions around the lease, the ground rent and the service charges, so be in a position to answer these.
It’s also worth considering extending your lease if you’re under the 70–80-year mark.
Weigh up whether the costs involved with extending the lease will be worth the value it can add to the property.
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Understanding how to sell your flat quickly can be difficult.
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Click on this link if you want more guidance on the difference between leasehold and freehold.
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