Leasehold properties are unique to England and Wales. There are approximately 4.3 million leasehold properties in England — 69% of which are flats. Selling a leasehold property can be an arduous task as many buyers are becoming wary of unscrupulous practices from property developers.
Several property developers hit the headlines in 2017 for unethical ground rent policies that left leaseholders with exorbitant annual bills — making their properties almost unsaleable. In June 2019, as a response to the “ground rent scandal”, the government announced plans to abolish the sale of new-build houses as leasehold properties and to reduce ground rents for new leases to zero. There is increasing speculation that the government may abolish leasehold properties altogether in favour of “commonhold”, which places no limit on how long the property is owned for.
However, properties that are already built can still be sold as leasehold as can new-build flats. So, what do you do if you “own” one of the 4.3 million leasehold properties in the country and want to sell?
What Is a Leasehold Property?
Many people choose a leasehold property as a more affordable way to get on the property ladder than buying a freehold home. Not only do leasehold properties typically cost less upfront, but there is also less responsibility for maintenance and repairs. It may also be preferable for people seeking short term accommodation.
If you buy a leasehold property, you become the owner for the length of the lease agreement. When the lease comes to an end, ownership returns to the freeholder. Typically, leases are between 99 and 125 years. There may be the possibility to extend the lease at the end of the term for a fee. If you have lived in a leasehold property for more than two years you have the right to extend your lease by 90 years if you are a qualifying tenant.
Commonhold is similar to leasehold but there is no time limit on how long you own the property for. Owners of individual properties can unite to form a commonhold association which owns the land, building and communal areas. The association is responsible for these areas and individual owners are responsible for their properties.
A freeholder owns a property outright, including the land it’s built on. Responsibility for maintaining the building lies with the freeholder.
Some leaseholders — people that live together in a block of flats, for example — club together to buy the freehold (or a share of it) from the owner.
What Happens When You Sell a Leasehold Property?
If you choose to sell your leasehold before the end of the agreed term, the remaining lease passes to the new leaseholder who will be bound by the original contract. Transferring an existing lease to a new tenant with the consent of the landlord (the freeholder) is called “an assignment”.
The new leaseholder can live in the property until the end of the term when they can choose to extend the lease or allow ownership to pass back to the freeholder.
Selling a Leasehold Property: Is It Hard?
A tenant who wishes to sell their leasehold must comply with all aspects of the contract regarding an assignment. It’s advisable to appoint an estate agent and conveyancer who have experience of managing leasehold sales as they will help you with this.
If you choose to sell on the open market, an estate agent will advertise a leasehold property in the same way as they would a freehold property. However, there may be an extra step when it comes to securing a buyer. Interested parties will need to direct any queries they have about the property to the landlord who may charge an admin fee for responding.
If you’re selling a retirement leasehold home, there may be an “exit” or “transfer” fee to pay at the point of sale.
Properties with a short lease remaining can be more difficult to sell. A lease with fewer than 80 years remaining costs more to extend because the freeholder is entitled to 50% of the extra value the lease extension adds to the property — “the marriage value”. It’s also more difficult to get a mortgage on a property with a short lease remaining. Few lenders will approve a mortgage on a leasehold property with fewer than 60 years to run. This limits the pool of potential buyers to cash buyers, which can mean it takes a lot longer to sell.
House Buyer Bureau is a genuine cash buyer with the funds to buy any type of property in any condition or location in as little as seven days after a formal offer is made. There are no legal, valuation or estate agent fees to pay. Contact us for a free cash offer today.