Selling a Flat with a Short Lease

Monday, 6th July 2020
Architecture | Leasehold Valuations

One of the most common reasons for leaseholders wanting to extend their leases is the need to sell. A property’s value decreases along with the lease, with a 70-year lease worth around 90% of a 100-year lease, whilst a 60-year lease is more like 80%. The basic mathematics of the lease extension process means that the cost of extending, plus professional fees should nearly always be less than the reduced price a buyer would pay.

Mortgageability and Cash Buyers

The shorter a lease gets, the fewer banks there are who are willing to lend. This translates into fewer buyers, which in turn is likely to mean lower offers and lower values.  Once you get into the 50s, there are so few lenders that you will only be looking at cash buyers which will depress prices even further.

If you cannot raise the capital for a lease extension yourself, you can start the lease extension process yourself, serve a formal S42 on the freeholder and assign the benefit to the incoming purchaser. Whilst you are left selling for a lower price, you will at least open up the market to a higher number of lenders and therefore potential buyers.

Informal Lease Extension

Not every lease extension requires the leaseholder to go through the S42 notice route and many freeholders are willing to agree to terms on an informal basis. If you have a short lease and want to extend to then sell on a long lease, you should be prepared to wait around 6 months from notice service to completion. An informal agreement, by contrast, can take a matter of weeks.

Leaseholders should always be wary of the first offer that comes their way, as in this surveyor’s experience these are significantly overpriced in 9/10 instances and typically include onerous ground rents that can devalue the property and be treated unfavorably by some lenders. There is usually some room to negotiate so you should always have your surveyor run their own valuation, to see what you should reasonably be charged.

Our surveyors at Peter Barry handle hundreds of lease extension cases per year and save clients thousands of pounds in negotiations. If you would like some free and impartial advice please either email or call on 020 8360 7615. We will be happy to help.

I had a really positive experience with Shaun Blake at Peter Barry. The survey was very thorough and Shaun was on hand to answer several follow-up questions I hand. I would recommend them to anyone.
Requested a level 2 survey with Peter Barry and was very happy with the service, the survey goes above and beyond what I have experienced before and gave a very thorough breakdown of the risks and what next steps both I and the solicitor should take. I highly recommend going with them!
Response from the owner:Thank you for sharing your experience working with Peter Barry Surveyors.
I’m using them to help with lease extension and provide valuation, survey and advise on same. Still in the process, but they have very quick, efficient, professional and also helpful to date.
Lease extension is a tricky process so having them deal with this efficiently and provide clarity has been so welcome.
Response from the owner:We are pleased to hear how useful you have found our service.
Peter Barry offers an efficient and effective service. Helpful advice on various levels of homebuyers reports. It was so helpful to be able to talk things through with David Breeze. Recommended.
Response from the owner:Thank you for your recommendation Mr Greenwood.
Administrator Joanne was super quick to get me into their system and assigned Surveyor, David Breeze. David is delightful, wonderful, knowledgable, even helpful after surveying the property to assist me with outstanding tasks to make sure I was comfortable and understood the reports.
Response from the owner:We are pleased to hear that you were so satisfied with the service you received from David.
Excellent customer service.
Jaynell was extremely helpful and David Breeze provided us with a very comprehensive and detailed report.
We welcomed the opportunity to speak with him before and after the survey. He answered all our questions and addressed our concerns by recommending possible solutions. I have already recommended him and all at Peter Barry.
Thank you for a very positive customer experience.
Response from the owner:We appreciate your recommendation & positive feedback, thank you.
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