Selling a leasehold flat may seem a difficult task, however, this simple guide will make the leasehold selling process much easier.
Here’s the good news: leasehold properties can be surprisingly simple to sell, especially if they’re in a prime location. Here’s the less good news: they’re still trickier to sell than freeholds due to the extra paperwork required. Our quick guide runs you through the leasehold selling process.
The initial work
You need to do a little research and check your leasehold paperwork to find out essential details.
Check how long you have left on your lease as the length of the lease remaining directly affects how valuable your property is. You can extend the length of the lease at a “favourable rate” under the Leasehold Reform, Housing and Urban Development Act of 1993. Anything above 95 years and it’s usually pointless to extend the lease, as the rate of return drops off significantly. If you have close to (but above) 80 years left, this strategy will likely pay.
Below 80 years and you may have an issue: the freeholder has a right to half the “marriage value” of the property. This marriage value is the increase in value created by extending the lease. In addition, you have the actual cost of the extension. Ultimately, the overall cost may not be worth it, so seek a valuation and legal advice before you make any firm decisions. Be aware that many mortgage providers do not offer mortgages for properties that have less than 80 years to go due to the significant depreciation in value, so you could be limiting your market.
You may also have the option of buying the freehold, but this requires substantial organisation as you need to get a large proportion of the leaseholders in the building to agree to this – a process that some have described as akin to herding cats. You’d need to talk to your legal representative about collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act of 1993.
Organising your paperwork
The paperwork for your lease will show the length of the lease and on what date it started, so you can work out how long is left. In addition, you need to include details of the service charge and budgets; any proposed major work, whether you need to be a member of a resident management company or a shareholder; and any assignment conditions for living there and selling the property on. However, don’t forget that conditions must be fair and reasonable, and they cannot discriminate.
Other bits of paperwork include evidence of insurance, the last three years of service charge accounts, the latest service charge budget, and confirmation that all payments are up to date. You may have to ask your managing agent for these.
Assigning an agent
Next, find an estate agent. Go with one that has extensive experience with dealing with leaseholds, as they are more aware of the conditions required and the questions to ask. Take recommendations from friends and family, and consider price, as well. In addition, take advantage of a free valuation from Yopa to get an idea of how much your property is worth.
You should already have a solicitor at this stage, as you need one to check what your leasehold entails and any potential issues with selling it. However, if you don’t have one, now is the time to get one on board. You can find a solicitor, but don’t forget that there are many conveyancers who deal with leaseholds, as well.
Offers and more paperwork
Now, you need to consider offers and fill out more paperwork. Once you accept an offer, you work with your solicitor or conveyancer to fill out all the relevant bits of paperwork involved. This means completing and signing:
- A contract of sale
- Fittings and contents form (TA10)
- Property information form (TA6)
- Completion information and undertakings (TA13)
- Leasehold information form (TA7)
Once these have been filled out and the relevant enquiries from the buyer’s solicitor have been made and answered, you should have a completion date. At this point, you exchange contracts and pay a deposit. Finally, you must inform the landlord within 28 days of the sale taking place.
Your leasehold has a value, even if it has less than 80 years to run. As a result, it’s worth checking out what options you have for increasing its value. Don’t forget that the ultimate aim is to walk away with as much money as possible and to make the property as sellable as possible, so bear in mind the various trade-offs that you can make when selling a leasehold flat.