Is It Hard to Sell A Leasehold Property?
Estimated reading time 6 minutes
Selling a property can be hard at the best of times so the last thing you want is for more complications to be added. That’s why it is important to establish from the start whether your property is leasehold or freehold. Chances are you are fully aware of which it is already. You just may not know the ins and outs of a property sale when parting with one or the other.
Today, our team at Gaffsy have spent some time looking at selling leasehold properties so that we can explain to you the processes behind it.
Firstly, we should probably explain, selling leasehold can be a little trickier than selling freehold property but not to the extent the move should be compromised. Quite often it could just be a few more forms to complete and documents to sign. Let’s dive in so you are fully up to speed with the sale of a leasehold property.
What is leasehold?
Leasehold properties are those where the people that own it, own just the property and not the land. This is quite often the case with flats and new builds.
Is my house leasehold or freehold?
If you are looking to sell your home fast it will be worth knowing whether your property falls under the leasehold or freehold title. You can find this out by checking some details in the contract you signed.
For example, the agreement you signed upon moving in will stipulate a set period that you may live in the property. You will also find that you are to be charged a ground rent and a service charge. The service charge being the fee where the landowner takes care of general grounds maintenance.
In addition, the agreement will show how the property should be used, whether you can have pets stay with you and whether you will be expected to cover some aspects of maintenance.
How long does a lease last?
This can vary but leases tend to last 99 years. In some cases, they can be significantly longer, the maximum being 999 years. When the lease ends, the freeholder takes the building back over. Quite often though, the leaseholders will look to extend their lease and if they have held it for 2 years or more, they have a legal right to be able to extend.
Can I sell a leasehold property?
As we touched upon at the top of the page, you can sell a leasehold property. There are just certain steps to follow to ensure everything runs smoothly and the sale isn’t held up by simple mistakes.
When you sell a leasehold property, the lease simply switches to a new leaseholder, the freeholder remains the same as do the terms of the agreement. The terms could change, however, should the landowner deem certain changes necessary. This, overall, is unlikely though.
The standard steps to selling a leasehold property are much the same as those selling freehold. Appoint an estate agent to manage the sale and a conveyancer to deal with the legal business that takes place behind the scenes. Then wait for offers to be made and work alongside your estate agent and surveyor to ensure everything runs smoothly.
When a suitable offer comes in and has been accepted, the relevant paperwork will be sent to the buyer along with a copy of the lease agreement.
Not in all cases, but certainly quite common, is that the buyer will ask for the information pack from the property managers. You will be responsible for paying for this if any fees are requested. Further to this information, the building insurance schedule may be asked for too. If the buyer feels satisfied by all the information provided, then they can complete the purchase. Upon doing so the freeholder will be informed that the lease has transferred.
Will it be hard for me to sell a leasehold property?
There can be a few things that make a leasehold property less desirable to potential buyers. These may not always be the case but keep in mind the following:
- Short leases of 80 years or less can make a sale difficult. This is because many lenders won’t offer to support the purchase of a property with a lease this short.
- Properties in poor condition are never a strong seller and with leasehold properties, the condition can further dent the value especially if your short lease has already helped reduce the price too.
- Increasing ground rents can be a huge deterrent to potential buyers. In some cases, ground rents double every 10 years. To remedy this, look to extend the lease before trying to sell. You could add 90 years to the lease at what is known as peppercorn rent meaning no ground rent will have to be paid.
- Lease terms can sometimes be undesirable to those interested. Service charges, ground rents, renovation costs and more can all hold people off from making an offer.
What is the best way to sell a leasehold property?
There are a few options you can take when selling a leasehold property and before proceeding, it is important you know what is included in the lease agreement. Selling a leasehold property is known as an assignment so it is vital you know what the assignment conditions for your property are before going forward with a sale.
When you do choose to proceed, you should consider:
- Extending the lease – This can generate more value on your sale, houses with a longer lease are more desirable. Costs associated with extending a lease can vary and it is worth noting that an extension could cost just over £7,000 with 95 years left on the lease but close to £28,000 if the lease has 60 years remaining. This does not include all the other fees associated with a property sale so this can be an expensive option.
- Purchase the freehold – If you are in a position to do so, this can make the purchase more desirable to those interested. They won’t have to pay ground rent and service charges for one! This has certain caveats to it though and can have a lot of costs associated with it too depending on whether you chose to deal directly with the landowner or not.
- Chose a cash buyer – This can often be the easiest option, no chains, no complications, just someone that buys the property fast. A cash house buyer removes a lot of the concerns traditional sales may bring and alleviates you from many of the typical issues.
The team at Gaffsy are property experts. We operate as cash house buyers meaning that a fast house sale is easy. We buy any house so there is never a reason to be concerned that your leasehold property won’t sell. We can give you a free cash offer and have you selling your property faster than you had thought possible. Contact our specialists today to find out more.