Selling a Flat with a Short Lease
It is becoming increasingly important to people buying leasehold properties to ensure that the lease they are buying is of sufficient length. If you are trying to sell a flat with a lease of less than 90 years left to run the chances are that a buyer will ask you to extend the lease. This is for two main reasons.
Firstly, mortgage lenders are becoming increasingly wary of lending where lease have dropped below 75/80 years. It is very often a requirement in a mortgage offer that the lease must have at least 80 years left to run at the date of completion.
Secondly, the premiums payable for lease extensions are increasing, particularly following a number of recent decisions in the Leasehold Valuation Tribunal.
Buyers are therefore wary about buying a shorter lease because of the premium and costs they will have to pay to extend the lease before they come to sell. Buyers are increasingly looking for the Seller to extend the lease before they buy or to reduce the purchase price to take account of the fact that they will have to pay to extend the lease.
This can be dealt with in one of two ways:
- Extending the lease back up to 99/125 yearsThis is a ‘quick fix’ option but is likely to be cheaper than exercising your statutory right to extend your lease and will make the property more attractive to potential purchasers. This option will only be available to you if your landlord is prepared to agree an extension to the lease outside the legislation.
- Exercising your right to extend your lease and assigning the benefit of the right to a buyer. -In order to exercise your statutory right to extend the lease, you will need to obtain a valuation from an appropriately qualified surveyor and serve a notice on your landlord. This can be done as part of the sale process and the benefit of the Notice you serve on the landlord will be assigned to the buyer on completion of the sale. The buyer will take over the responsibility for payment of the premium for the lease extension and for all costs incurred in connection with extending the lease.