Selling a residential property can be a complex process, and having a short lease can add another layer of difficulty. A leasehold property with fewer than 80 years left on the lease is generally considered short, and it can significantly impact the saleability and value of the property. Here’s how to effectively navigate the challenges of selling a property with a short lease.

Understanding the implications of a short lease

A short lease can deter potential buyers for several reasons:

  1. Mortgage difficulties: Many lenders are reluctant to offer mortgages on properties with short leases. If they do, the terms may not be favourable, which can limit your pool of potential buyers.
  2. Decreased value: Properties with shorter leases tend to be valued lower than those with longer leases. The cost to extend the lease must be factored into the sale price.
  3. Future uncertainty: Buyers may be wary of the future costs and complications associated with extending the lease, which can affect the desirability of the property.

Steps to mitigate the challenges

  1. Extend the lease before selling: If financially viable, extending the lease before putting the property on the market can significantly increase its appeal and value. While this requires an upfront cost, it can be a worthwhile investment. According to UK law, once you have owned the property for two years, you are entitled to extend the lease by 90 years, reducing the ground rent to a nominal amount*.
  2. Price the property competitively: If extending the lease isn’t an option, pricing the property realistically is crucial. Be prepared to negotiate and possibly accept a lower offer to reflect the cost and hassle the buyer will incur in extending the lease themselves.
  3. Be transparent: Honesty is the best policy when dealing with potential buyers. Clearly communicate the length of the lease and the implications. Providing a detailed cost estimate for the lease extension can help buyers understand the full financial picture.
  4. Target cash buyers: Cash buyers are not subject to the same mortgage constraints, so they may be more willing to purchase a property with a short lease. Marketing your property specifically to cash buyers can streamline the selling process.
  5. Highlight other selling points: Emphasise other attractive features of the property and its location. While the lease length is a critical factor, other aspects like good schools, transport links, and local amenities can still appeal to buyers.
  6. Consult a specialist solicitor: Engage a solicitor experienced in leasehold properties. They can provide invaluable advice and support throughout the process, from understanding your rights to negotiating with the freeholder for lease extension terms.

Practical tips for marketing your property

  1. Professional valuation: Get a professional valuation that takes into account the short lease. This will provide a realistic starting point for your asking price.
  2. Effective advertising: Use targeted advertising strategies to reach potential buyers who may be interested in properties with short leases, such as buy-to-let investors or developers.
  3. Open house events: Hosting open house events can attract a large number of potential buyers in a short period, increasing your chances of finding an interested party quickly.

Conclusion

Selling a property with a short lease requires strategic planning and realistic expectations. By understanding the implications, exploring options for lease extension, and effectively marketing the property, you can navigate the challenges and achieve a successful sale. Patience and transparency are key, and with the right approach, you can turn what seems like a disadvantage into a manageable aspect of the sale process.

If you would like to instruct one of our experts at Fisher Jones Greenwood to assist you with a lease extension, or if you would like some further information before deciding whether or not to proceed with a lease extension, please contact Leon Pascal ([email protected]) or Sarah Shea ([email protected]) by email or telephone on 01245890110.

Disclaimer: This guide provides general information and should not be considered legal advice. Always consult a qualified professional for personalised guidance based on your specific circumstances. The contents are based on the law as at the date of publication.
*The Leasehold and Freehold Reform Act 2024 removes the requirement to have owned the property for two years before being eligible for a lease extension, and entitles tenants to extend the lease by 990 years as opposed to 90. As at the date of this post, however, the secondary legislation bringing these provisions into force has not yet been implemented.