Can You Sell A Leasehold Property?
Selling a home can be complicated. A leasehold property brings its own set of complications and confusion – but there are simple steps you can take to secure the sale you want, quickly and efficiently.
Looking to sell your leasehold home? Keep reading for our complete guide on navigating the sales of leasehold properties.
What is a Leasehold Property?
Let’s start by understanding what we actually mean when we refer to a ‘leasehold’. When a buyer purchases a leasehold property, they become the owner of the building, but not the land it stands on – this will still belong to the freeholder.
When a leasehold is purchased, the buyer is actually buying the right to live in the building for the duration of the lease, whatever that may be. The buyer will take out a lease with the freeholder, stipulating an amount of time for which the building will be under their ownership. This could be anything from 99 to 999 years, but it is a finite amount. The lease will include details such as ground rent fees, the lease term, and any relevant service charges for the upkeep of communal areas.
How Does a Leasehold House Differ From A Freehold?
In contrast, a freehold occurs when a buyer purchases the property in its totality, land and all, with no finite terms and conditions. This means they have free rein and complete control over the building and the land it sits on, along with all the responsibilities that come with this right, such as maintenance and repairs.
Legal Rights of Leaseholders Looking to Sell
If you’re a leaseholder looking to sell your property, you are completely within your right to do so whenever you please – but there are some key considerations to keep in mind that will differ from a freehold property sale.
From a legal perspective, you’re required to inform your freeholder that you’re looking to sell. Depending on the terms of your lease, the freeholder may hold the ‘right of first refusal’, which stipulates that they have the right to buy the property before it goes up on the market. Check your lease closely before you do anything to avoid getting caught up in any sticky legal situations.
There’s also the length of your lease to consider. You’re under no obligation to keep to the agreed timeframe, but the remaining lease length does have the potential to impact the sale. For example, if your lease has less than 80 years remaining, it will likely be seen as less attractive in the eyes of hopeful buyers, as this will make it harder for them to secure a mortgage from lenders.
If you’re starting to panic, all is not lost – you do have the option of negotiating a lease extension prior to selling, but be aware that this can be costly and time-consuming.
Steps to Selling Your Leasehold Property
- Review Your Lease
First things first – have a long sit-down with your lease agreement to ensure you’re completely and utterly up to speed with your rights and responsibilities, making sure you understand your obligations and any restrictions that have the potential to affect the sale.
- Obtain Any Necessary Documents
When it comes to communicating with your potential buyers, you’ll need to be able to offer them a whole host of documents – a copy of the lease, details of fees (such as the ground rent and any service charges), and a management pack from your freeholder or managing agent. Save yourself the headache down the line and gather these early to avoid prolonging the process.
- Consider a Lease Extension
As we mentioned, this could be a smart move if your lease has less than 80 years remaining. Assess your situation, and decide what you feel is right.
- Set a Price
Stay realistic here – of course, you’ll want a price you think is fair, but there’s a lot that comes into the process of pricing a property, such as the length of the remaining lease, the ground rent, and any upcoming major works that might need doing to the building. The local area is also a huge factor here, so working with an estate agent who has a sound knowledge of the property market around you will be key in reaching a price that you and your potential buyers are happy with.
- Market Your Property
It’s time to make your property shine – get some professional photos taken, write up a description that showcases your house in its best light, and make sure to emphasise any significant works on the property, as well as its location – not forgetting your lease extension, if you’ve taken one out.
- Work With a Solicitor
It can be handy to enlist the help of a professional here – there are a lot of laws and regulations to consider when it comes to selling a leasehold property, so some expert support with staying on the right side of the law is always recommended.
Challenges & Considerations
Longer Timeframe
Be prepared to wait around a little longer than you might do with a freehold – a leasehold property requires both the freeholder and the leaseholder to be included in the sale, so there’s a lot more to consider and extra documentation involved in the process.
Negotiations
Especially if you’re selling a leasehold flat, you’ll often be dealing with a shorter lease term. Because of this, you might be looking at some extra back and forth with the buyer, as they could want to come to negotiate a longer lease as part of the purchase.
Mortgage Lenders
As we know, mortgage lenders can be hesitant to provide loans for properties with shorter leases, meaning your potential buyers could be looking at a challenging time securing a loan if your lease is on the shorter side. Always assess your lease length before making the commitment to getting your leasehold property up for sale.
How We Can Help
At Zest, we have a professional team of expert lettings and estate agents ready to guide you every step of the way on your property selling journey, with the local knowledge and selling experience required to secure you a speedy, stress-free sale. Get in touch today to hear more about how we can help you get your leasehold property up on the market and into the next homeowner’s pair of hands.
