You absolutely can sell a flat with a short lease with Property Saviour. Our cash offer means there are no estate agency fees, no lease extension cost, and we provide you with complete certainty.
We will offer you a higher sum if you can serve notice on the freeholder. There is no better way to sell properties with short leases.
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What is a short lease on a flat?
When selling a flat with a short lease, it’s important to understand what qualifies as a short lease and how it can impact your sale. According to the Royal Institute of Chartered Surveyors, a 70-year or less lease is considered ‘short’.
However, each lender will have their own criteria for the minimum lease length they’re willing to lend on, and the industry standard is generally a minimum of 80 years.
The length of the lease is significant because as it gets shorter, the value of the lease decreases, and it becomes more costly to extend it. When selling a property with a short lease, there are two key factors to consider.
Firstly, you’ll only be able to sell to a cash buyer since lenders typically decline to lend on short leases.
Secondly, any potential new owner will consider the lease extension cost when making their offer.
This means that properties with short leases are usually sold at a considerable discount from the market value.
As a seller, this leaves you with a decision: whether to extend the lease at a significant cost to yourself or to sell the property at a discount.
The Lease Advisory Service Lease Extension Calculator can estimate the costs based on the lease length and legal expenses.
Under the 1993 Act, leaseholders applying for an extension are responsible for paying the landlord’s legal and valuation costs. Leases with 80 years or less remaining term incur additional costs as marriage value must be paid.
Marriage value refers to the increase in property value resulting from the grant of a new lease, and it’s included in the calculation of the premium. It’s advisable to seek professional advice from a chartered surveyor and solicitor before embarking on this process.
One common challenge is the difficulty in locating the Freeholder. If the Freeholder is missing or unresponsive, the process becomes even more complex and costly.
Your options when selling an apartment with a short lease
These are your options to consider:
Sell the flat without extending the lease
Selling your short-lease apartment without addressing the short lease in some way will likely result in a lower selling price than if it had a longer lease. This could be due to reduced interest from potential buyers concerned about risks, uncertainties, and mortgage issues.
It could also be because you can only sell to cash buyers. To understand how the short lease will impact the sale price of your property, you should consult with your solicitor, who can advise you on the necessary steps to take before or during the selling process.
Informally extend your lease, then sell
This option is often the most beneficial for leaseholders selling with a short lease because it is the quickest solution. It allows your flat to be marketed by an estate agent as having a longer lease.
This is possible because your lease will be extended through the informal (non-statutory) process before completing your sale. Your Sale Contract will be conditional on the lease being extended before the sale is completed. Therefore, your buyer will only purchase the property once it has a longer lease.
If your freeholder is a local authority or housing association, extending your lease through the informal (non-statutory) process may be impossible.
Since the flat is sold with a longer lease, the buyer cannot negotiate a discount on the sale price due to a short lease. You can sell your flat at its full market value.
Extending a lease through the informal (non-statutory) process can take 1-3 months from beginning to end. The duration depends on how responsive and reasonable your freeholder or management company is.
However, the process of extending a lease informally can occur simultaneously with the conveyancing process. The lease extension and the sale can be dealt with simultaneously, so the lease extension does not need to delay your sale.
Seek professional advice from a specialist in lease extensions
It is crucial to seek early advice from a specialist lease extension solicitor. This process involves negotiating with your freeholder, so it is recommended not to inform them of your intention to sell your property.
Doing so may weaken your negotiating position, as the freeholder may believe your options are limited due to a tighter timescale.
It is advised that you have a lease extension solicitor make the initial approach to your freeholder to request an informal offer on your behalf.
Freeholders often try to take advantage of their experience and knowledge in dealing with lease extensions, often with the guidance of solicitors.
On the other hand, leaseholders may not be as well-informed or experienced in this area and may not have access to specialised legal advice. Lease extension legislation is complex and requires expertise.
If a solicitor makes the approach on your behalf, your freeholder will know that you are receiving professional advice, which may discourage them from making an unreasonable offer.
Freeholders often prefer leaseholders to extend their lease informally because it allows them to maintain or increase ground rent provisions. They can also offer a shorter lease extension than the formal (statutory) process, which helps preserve the long-term value of the freehold, a priority for many freehold owners.
A freeholder will understand that if they make an unreasonable informal offer and a solicitor advises, you are likely to proceed with the statutory process against their wishes. Therefore, they will likely try to avoid this situation.
Careful consideration of service charges and ground rent
When extending a lease through the informal (non-statutory) process to make the property more marketable, it is essential to carefully consider the proposed ground rent and ground rent review clauses in the new lease.
A specialist solicitor in lease extensions will need to advise you on whether the ground rent and ground rent review clauses suggested by your freeholder are onerous. If they are, this would affect the marketability of your property, just like having a short lease.
In addition to potentially burdensome ground rent and ground rent review clauses deterring buyers or raising concerns for their conveyancing lawyer, the freeholder can propose other new or amended clauses in the draft lease that may be onerous.
Extend your lease 'formally' and sell
If you want to sell your property, consider extending your lease beforehand.
According to the Leasehold Reform, Housing and Urban Development Act 1993, leaseholders who have owned their flat for at least two years have the right to serve a notice on their landlord to extend their lease.
This notice is known as a Section 42 Notice. Going through this procedure, your lease would be extended by 90 years, and the ground rent would be reduced to a peppercorn (nil) after the new lease is completed.
It is important to note that completing the statutory process can take anywhere from 8 to 12 months, potentially delaying your property’s sale.
If you need to sell your apartment now, we will buy it with a short lease.
It’s crucial to adhere to all the specified timeframes throughout this process. This is one of the reasons why seeking advice from a specialist lease extension solicitor is highly recommended. Missing a deadline can bring the entire process to a halt and delay your ability to restart the process again.
A statutory lease extension is typically pursued when the freeholder does not accept informal (non-statutory) lease extensions or when the informal offer made by the freeholder is onerous.
Overall, it’s important to carefully consider the timeframes and seek professional advice when pursuing a lease extension before selling your apartment.
Buying the freehold
It’s not the ideal solution if you want to sell your property quickly, but buying the freehold with the other leaseholders is a great way to enhance the marketability of your leasehold flat.
This process, called collective enfranchisement, will convert your property into a share of freehold. Buyers prefer this type of ownership as it offers more security and eliminates the need for ground rent payments.
While it may be possible to negotiate this informally, hiring a qualified solicitor to handle the process is typically recommended.
Selling with the benefit of assignment of the Notice
Often, sellers can serve the notice to extend and get a better price from a cash property buyer such as Property Saviour.
This route involves starting the statutory process by assigning the benefits and liabilities of the Section 42 Notice to a buyer as a condition of sale. This allows for a faster completion of the sale, as the lease extension does not need to be completed first.
Typically, the buyer would negotiate a lower purchase price based on the premium proposed in the Section 42 Notice or a similar amount. The advantage for the buyer is that they do not have to wait two years to extend the lease.
It is crucial that your lease extension solicitor advises on the Sale Contract to include provisions for the assignment and to protect your interests by ensuring that you are not responsible for costs arising from the Claim Notice and the start of the statutory process.
With this option, since you will not be completing the lease extension, you will not have to pay the Premium to the Freeholder. Instead, the buyer will pay it when they complete the process after purchasing the flat.
This option has some complexities, including the uncertainty surrounding the final Premium that the buyers will have to pay the Freeholder and associated costs. The premium proposed in the Section 42 Notice that is served is not the final amount that the buyer will pay.
Auctioning your property
Auctioning a property comes with its own set of risks. You will have to pay upfront entry fees costs, pay a solicitor for a legal pack, order searches, set a very low guide pricing and hope that your apartment sells!
Firstly, you must wait for the auction date, and secondly, it can be quite expensive, with registration fees ranging from £400.00 to £600.00.
Once sold, the buyer will have a further 28 days to complete. The whole process can take up to 3 months to complete.
The price you obtain at the auction greatly depends on the auctioneer’s effectiveness of the property’s marketing and the presence of potential buyers on the day of the auction.
There is no guarantee that your property will sell on that day.
Approach a quick sale company
We will buy any property with a short lease in England and Wales, regardless of its condition or the length of the lease. We are willing to purchase currently tenanted properties with a short lease.
Our cash offer provides the most cost-effective method for selling a property with a short lease. There are no estate agent fees involved.
- No upfront valuation, survey or legal fees.
- No chains, hassle-free completion.
- No worries about post-survey recommendations.
The price agreed is the price we pay with zero deductions.
- No waiting around for months for buyers to come.
- No disappointments or collapsed sales.
- We guarantee to buy your apartment fast, regardless of condition.
So what are you waiting for? Click on the enquiry form and get a cash offer today!