If you own a leasehold property, you’ll be relieved to learn that selling it is easier than it appears. Although there are certain differences, selling a leasehold home is not any more difficult than selling a freehold property. As with any other real estate transaction, preparation and knowledge are vitally important. Our simple step-by-step guide to selling a leasehold home is designed to help you understand the process and what is involved.
What is a leasehold property?
Owning a leasehold property means that, while the physical structure itself is yours, the ground it stands on and the communal areas belong to the freeholder. When you buy a leasehold property, you become the owner for the duration of the lease. When the lease expires, the freeholder reclaims ownership. This rarely happens, though, because the lease can be extended indefinitely.
How long is left on my lease?
Before you list your property it’s important to find out how many years are left on your lease. This information is crucial as a lease of 80 years or less can negatively impact the price of your property.
What happens if my lease is short?
When your lease has 80 years (or less) left on it, extending it becomes more difficult and expensive. This is because after this point the freeholder takes 50% of your property’s ‘marriage value’. Marriage value is the amount of extra value a lease extension adds to your property. It’s still possible to sell a property with a short lease, although it will probably have a negative effect on the asking price. Buyers will find it harder to get a mortgage on a property with a lease of less than 80 years, and below 60 years they may not get one at all. This means that if you don’t extend, your options may be limited to cash buyers or an auction sale. As such, If your lease is approaching the end of its term, it’s a smart idea to renew it.
Selling a leasehold home
A leasehold property can be sold in the same way as any other property. There is some more paperwork to hand over, but your solicitor or conveyancer will handle it. Things only change if your lease is short, in which case it might be hard to find a buyer. Luckily, there are two main ways to make your sale easy and successful if you have a short lease: extend the lease, or buy the freehold.
1. Extend your lease
Extending a short lease will add value to your home. The price of an extension depends on many things, including the value of your home, the current lease length, and ground rent charges. Many leaseholders decide to renew their leases only when they are approaching the 80-year threshold.
2. Buy the freehold
The second option is for you to buy the freehold. If there are other leaseholders, then you can club with them and buy the freehold together. Buyers are generally more attracted to properties that come with a share of the freehold.
Tips for selling your leasehold home
- As soon as you’ve decided to sell, start thinking about what you’ll do with your lease.
- Extending your leasehold or buying your freehold will help you get the best price for your flat.
- Engage an estate agent to market the property, schedule viewings, and keep you updated on all offers.
- Make sure you have a good conveyancer or solicitor to guide you through the process.
- Once you have come to a deal with the buyer, you will be exchanging contracts with each other. Both you and the buyer will be obligated to finish the transaction.
- You and the buyer will agree on a completion date. The sale will take place on this day, and the remaining earnings will be remitted to you.
