Selling A Property With a Short Lease by Mike Brown
When you purchase a leasehold property, you obtain a right to live in the property for a specified period of time. This can seem a long time away when you first purchase the property, however you must always look at the possibility of having to obtain a mortgage or even selling in the future.
If you try and sell your leasehold property with a lease of less than 80 years left to run, it is highly probable that the potential buyer will incur difficulties. For example, complications when obtaining a mortgage, which could potentially cause the potential buyer to withdraw from the transaction, delay the sale or even request a reduction in the agreed purchase price. It is becoming increasingly more common for mortgage lenders to take a more cautious approach when undertaking due diligence for a leasehold property. The majority of lenders request that a certain period of years are remaining on the lease or will be left at the end of the mortgage term.
So, I hear you say, how can we be proactive and ensure that the most valuable asset we hold can be protected and will not diminish in value. Well, there are two options:
Contact your landlord to negotiate an agreed extension to the lease to increase the term back up to 99 or 125 years. This would, on the face of it, be quicker and cheaper providing the landlord is agreeable to extending the term and proposes a reasonable premium for extending the term.
Exercising your statutory right to extend your lease. For this process you would need to obtain a Valuation Report from a qualified surveyor and serve a notice on your landlord. This can be incorporated to be part of the sale process, with the benefit of the agreed extended term being assigned to the potential buyer on completion. In most cases, depending on the terms of the purchase, the potential purchaser would be responsible for payment of the premium for the lease extension and associated costs.