Property Lease Expiring Soon?
Why a Short Lease Could Prevent you from Selling Your House and Cost You More Money in the Long Run
There are 1.43 million leasehold properties in the UK and many of their owners are unaware of the financial implications of their property’s shortening lease. Not a lot of people realise that a property’s value will decrease as its lease gets shorter; a lease with less than 75 years left is considered to be a short lease and can cause serious problems if you are trying to sell and can even leave you in negative equity if the short lease means that its current value is less than the amount you owe on your mortgage.
The majority of mortgage companies will refuse to lend if a property has a short lease, meaning that if you want to sell or re-mortgage the property you will have great difficulty finding a lender willing to give you a mortgage. There are some lenders who will consider lending if the lease has at least 65 years left, but any less than that and it will be virtually impossible to re-mortgage and you will have difficulty selling your property due to the short lease, as buyers who need a mortgage won’t be able to buy it.
It may be possible for you to get a lease extension; if you have owned the property for 2 years or more, under the Leasehold Reform, Housing and Urban Development Act 1993, you have the right to extend the lease, but it will cost you. You will need to instruct and pay for a surveyor to determine the value of the lease to start off with and you will need to pay legal/admin fees on top of the cost of extending the lease. You may also be liable for the freeholder’s costs as well. Depending on how long is left on the lease the cost of renewing it could be up to £10,000. When the lease reaches 80 years or less the Marriage Value comes into play and the value added to the property by renewing the lease will also be taken into consideration, this means it is wise to apply for a lease extension before the lease reaches 80 years.
If you are trying to sell your property and have a short lease, this will significantly reduce the value of the property and will eliminate any buyers who would need to obtain a mortgage, meaning that only cash buyers will be able to purchase the property. If you find yourself unable to sell the property on the open market and can’t renew your lease, either because you do not have the right to or cannot afford to, then you have very few options left open to you; you can save up the money to extend the lease, or you can try and find a cash buyer who doesn’t mind the short lease term.
The longer you own the property and the more time that lapses on the lease, will devalue the property even further and the cost of a lease extension will only increase. If the lease runs out completely then the property’s ownership will legally revert to the freeholder. If you are having difficulty selling a property due to a short property lease then it may be worth considering other options such as contacting a fast purchase property company, like National Homebuyers, who will be able to buy your house from you directly and will not be deterred by the short lease. This means you will be free of the property and can move on, whatever your reason for selling. So if you are looking to sell your house fast, contact us today.
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