Associate and Leasehold Specialist Anne Albritton looks at selling a flat with a short lease, discussing how short leases can affect the value of a property; and answers some of the questions that you may have.
What is a short lease?
Regardless of whether your flat is in a purpose-built block or a converted house it will more than likely be leasehold. This means that you have a right to occupy the flat for the term of the lease.
So if the lease term has 85 years left on it this is how long you can occupy the flat for and the flat can be bought and sold. The lease term, as the years go by, will shorten.
Does a short lease devalue a property?
As the lease gets shorter it reduces in value and becomes less attractive to mortgage lenders.
Different banks and building societies have different lending criteria regarding what lease term they consider acceptable.
How much does a short lease devalue a property by?
A flat with a short lease may lose 10-20% of its value however in order to ascertain how much a flat is devalued by specialist advice should be sought from a valuer who specialises in lease extensions.
The sale value of a leasehold property falls over time – once the remaining lease term drops below 80 years marriage value comes into consideration.
What is marriage value?
Marriage value is the increase in value of a property arising from the grant of a new lease and is included in the calculation of the premium, the freeholder is entitled to 50% of value which the extension adds to the property.
Can I sell my flat with a short lease?
Yes, you can to approach your landlord to see if they will negotiate an extension. If this is not successful you can start the process of obtaining a lease extension under the Leasehold Reform Housing and Urban Development Act 1993 (the Act).
Subject to owning the flat for two years, you can force the landlord to extend the lease for an extra ninety years on top of the unexpired term at a peppercorn (nil) rent.
To read the full article, click here.