Are you concerned about leasehold extensions or worried about short leaseholds? Most flats in England and Wales have leaseholds, but properties with short leases on them are less desirable and can be tricky to sell. As there are always a whole load of questions that come up when leaseholds are mentioned, we’ve put together an essential guide to leasehold extensions and short leaseholds to guide you through what you need to know.
What is a leasehold? Freehold versus Leasehold
A leasehold is the term used to describe the legal ownership of a property. In the cases of houses, most tend to come with a freehold, which means you own the property and the land it is on. Your name appears on the Land Registry ownership details and you own the ‘title absolute.’
However, in the case of flats which are part of a larger building, they normally come with a leasehold (houses bought as part of a shared ownership scheme can also be leasehold too). A leasehold essentially means that you have bought a lease from the freeholder to use the property for a set number of years then it will expire.
As the years go by, the number of years you have left on your lease will decrease. Longer leases are more desirable, whereas shorter leases are less appealing and can cause problems.
What are your liabilities as a leaseholder?
As a leaseholder, you have a contract with the freeholder that needs to be upheld. Your lease will outline what conditions you have agreed to, for example you may have to pay maintenance fees and annual services such as ground rent.
Unlike when you own a freehold property, you may need to obtain permission before carrying out any work on your property. And you may face restrictions, such as not being able to have pets or not being allowed to sublet your flat.
If you’re unable to meet all the key terms involved in your lease, then you may be taken to court and you could lose your lease and property.
What are long and short leaseholds?
When you buy a leasehold property, you will know exactly how long the lease lasts. Typically, a long leasehold can be anything from 99 years to 999 years – the longer, the better!
A short leasehold is generally regarded as being a lease of 80 years or less, although sometimes people can experience problems with properties with a lease of between 81 and 90 years too.
What problems can short leaseholds cause?
Owning a property with a short leasehold can cause a variety of problems. If you want to sell your flat, you may find it more difficult to attract a buyer, as they may be more reluctant to purchase a short leasehold property, plus the price you can realistically get will be lower than a flat with a longer leasehold. For example, the value can typically be more than 10 per cent lower than other flats in the same building with longer leaseholds.
Moreover, banks aren’t keen on offering mortgages to people purchasing short leasehold properties, which can add to your difficulties.
If you’re trying to sell a flat with a short leasehold, it’s not unusual for a buyer to ask that you first apply for a leasehold extension before they’ll consider purchasing it.
What are leasehold extensions?
A leasehold extension is the process of extending your current lease so that it becomes longer.
Leasehold extensions can solve the problems you have with a short leasehold, making your flat more appealing to future buyers and giving you the peace of mind of having a longer lease. In addition, leasehold extensions could help prevent your flat from losing value.
What costs are involved in leasehold extensions?
Applying for leasehold extensions is unfortunately not a cheap process, and neither is it always straightforward and quick either.
The exact costs involved will depend on:
- What your property is worth
- How many years you have left on the lease
- The cost of your annual ground rent
- The expected rate of return on investment
- The value of improvements made on the property by the leaseholder
In addition to the cost of purchasing the leasehold extension, you’ll also encounter a range of other fees too. So you’ll need to budget to be able to pay:
Legal fees to a solicitor
A surveyor’s valuation report
Land Registry fees
The legal and valuation fees of the freeholder.
It is worth noting that the costs involved in getting a leasehold extension increase the shorter your current leasehold is. So if you’re thinking of applying for an extension, it’s better if you do so before your current leasehold reaches 80 years or less.
Is it necessary to use a solicitor when negotiating leasehold extensions?
Although it might be tempting to think about bypassing the use of a solicitor when negotiating leasehold extensions, it is a legal matter and you’re better off going down a proper legal route rather than doing it on your own.
If you’re on good terms with the freeholder, then it may seem possible to negotiate an agreement directly with them. However, things can sometimes go wrong and you may end up paying more in the long run for your extended lease than you would have by using legal expertise.
In order to ensure you get the best deal, it’s always best to use a professional who has experience negotiating leasehold extensions. The Association of Leasehold Enfranchisement Practitioners is a good place to look for someone – you can use their site to search for a property expert in your area.
What steps are involved in applying for leasehold extensions?
If you are going to apply for a leasehold extension, then there are a number of steps you’ll have to go through in order to get a claim processed.
- Firstly, you’ll need to contact the freeholder and let them know that you want to apply for a leasehold extension.
- Next up, you’ll need to hire a specialist lease extension solicitor for your case.
- You’ll need to find a surveyor who has experience in leasehold extension legislation. Your solicitor may be able to recommend someone to use.
- Your solicitor will make a formal offer on your behalf.
- If the landlord requires a deposit to be made, this will then need to be paid within 14 days.
- Your solicitor will negotiate with the freeholder on a suitable price for your leasehold extension.
How long does the leasehold extension process take?
The process of embarking on a leasehold extension can take anything from between three months and a year to complete, depending on factors such as how willing the freeholder is to negotiate an acceptable price and how long the evaluation takes. The process is definitely helped and made smoother and quicker by having experienced professionals involved, rather than trying to do it yourself.
What happens if the freeholder doesn’t accept the lease extension offer?
In the majority of cases, a solicitor will be able to successfully negotiate an acceptable offer with the freeholder, even if it takes several rounds of negotiations.
If no agreement can be made, then your solicitor can apply for a tribunal. This is unfortunately a time-consuming process and it can result in being expensive too, so ideally your solicitor will help you avoid this as much as possible.
How to sell your short leasehold property without a leasehold extension
If you own a property in London with a short leasehold and want to sell it, without applying for a leasehold extension, help is at hand!
Molae Properties specialize in buying properties with short leaseholds and are cash buyers. Rather than worrying about trying to sell your potential problem property, contact Molae Properties today and you can sell your property in under 21 days or at a timescale of your choice.
