Selling or buying a property which has a lease with less than 85 years remaining on the term often proves difficult.
Selling or buying a property which has a lease with less than 85 years remaining on the term often proves difficult. Many flat owners are currently being faced with this issue because thousands of leases granted in the 1980s are now running down. Where a lease is that low it can be impossible to get a mortgage over it and even cash buyers will find that they need to extend the lease at some point. This adds up to flats with short leases being very difficult to buy and sell.
In my role as a leasehold specialist at Thackray Williams solicitors, I often find buyers and sellers are unsure of their options of how to deal with a short lease.
So, what is the process if you want to sell your home but the lease has dipped below 85 years remaining?
You should look into getting a lease extension well before a sale or purchase is completed. If proper arrangements are made then the property will be more desirable because of the extended lease and can often be sold for a better price.
Initially you could see if the freeholder is prepared to grant a lease extension without the need to serve a notice under legislation. That is called extending the lease “informally”. If the freeholder won’t accept such an approach and you have owned the property for two years then you may well have a legal right to a lease extension. That is known as a “formal” lease extension claim.
For a formal claim, a professional surveyor or “valuer” must value the lease extension and advise you how much the freeholder can charge for it. That is known as the “premium”. Your lawyer should be able to recommend a good local specialist.
Your lawyer can then use the valuation to start a claim by giving your freeholder a specific form of notice, and the claim then follows a series of strict deadlines. If you are selling it is possible to start the claim and then pass it on to your buyers, so that they do not have to wait two years before extending the lease.
As a word of warning – formal lease extensions are complex and there are many pitfalls that can upset your claim if it is not managed correctly. For example if deadlines are missed or incorrect wording is used then it might not be possible to properly start your claim. Worse still, if you are a buyer then you could buy a property but be unable to continue the claim because of an error, meaning you must wait two years and possibly pay a bigger premium. A formal claim should only be undertaken by a specialist leasehold solicitor.
Generally, the cost of extending your lease becomes increasingly expensive the longer it is left. If your property suffers from a lease of less than 85 years then it is advisable to take action to extend your lease as soon as possible, even if you are not considering selling at the moment.
This article was written by Vikki Herbert, head of the leasehold enfranchisement department at Thackray Williams solicitors. If you should need advice on any of the issues mention in this article she would be more than happy to answer your questions. Contact Vikki on firstname.lastname@example.org or 020 8290 0440.