Hi, it’s William James here – I specialize in leasehold properties at Fidler & Pepper. I’ve had a few clients recently who have been in the process of selling a leasehold property and discovered that as a result of the term of their lease being around 70 years they have been unable to attract any buyers
In light of this I thought I would put together a brief guide as to why it might (from a sellers point of view) be a good idea to extend your lease before you find a buyer!
· As long as you have lived in your property for at least 2 years you have a statutory right to extend your lease.
· If your flat was built or the lease was granted anytime between the 1960’s and 1980’s your lease will almost certainly fall into the category needing extension attention.
· Most people will want to extend their lease as it can increase the value of their property. As soon as your lease reduces to around 60 years then the value decreases significantly and effectively becomes un-mortgagable. It is therefore difficult (if not impossible) to sell to the vast majority of buyers purchasing with a mortgage.
· Extending your lease can take time (sometimes up to 6 months) so it’s not something you want to leave to the last minute if you are thinking of selling your property!
· The longer you wait to extend your lease and therefore the less that is left on it the more expensive the cost of the extension will be.
· An example of a flat with a 68-year unexpired lease, on a ground rent of £100.00 pa, with a current value of £100k would cost approximately £7k to £8k to extend the lease. The same property, on a lease with only 35 years to run, would be considerably more expensive (£50k to £60k). However if you extend your lease before it has less than 80 years left to run (95 years for example) the cost of this extension would be in the hundreds rather than thousands.
· Property prices have fallen over recent years and this can work to your advantage as any compensation that you pay to the Landlord is linked to the current value of the property and therefore you would pay considerably less today than you would 2 to 3 years ago.
If you have any questions about extending your lease please get in touch by email or by leaving a comment on this blog.