What is considered a short lease property?
A short lease property is a lease that has 80 years or less to run. Usually you can determine this from the title deed for your apartment, maisonette or flat. If you’re the property owner you could refer to your title deed. If you do not have it, you can either search online for title deed providers or reach out to us so we can provide one for you in a pdf format.
Title Deed
A title deed for your property will provide you with property details and will usually state when the lease was started. You will simply work backwards, taking away the dates from now to when the lease was first established. This will provide you with how many years are remaining on the lease is, how much more is left on the lease.
Let me give you a general background of a lease. Generally speaking, apartments, maisonette or flats built in the year 2000. Generally come with a lease of 125 years or more. Occasionally, you may be able to get a staggering 999 years in length. This occurs occasionally, but not often. Leases will also be applied to buildings that were built between 1960 and the 1970s. These will generally have about 99 years on their lease at the time of construction. This means that you could be 50 years into a lease at the moment and it will need extending by the owner or the new buyer.
Extending your lease does not come cheap. We could be talking anything between 12,000 to 100,000 (at the time of writing this article) upwards. I’ve seen situations where someone had paid £90,000 to extend a lease.
Leases depend on the property type
It depends on the freeholder and location. It has many different factors that determine how much that lease will cost to extend, so it is important to recognize this.
It’s always best to weigh up the cost of extending that lease against the cost of reducing the price of your property before actually selling it. It is also a good idea to extend them as early as possible so that you’re not faced with this dilemma later on.
Bear in mind when you are trying to sell short lease property, you’re going to have a restriction on the number of buyers that can buy, because I have found that people that buy short lease property are cash buyers and cash buyers generally pay less for properties because they are the one that’s now going to find a way to extend that lease and spend that money, so remember that when you’re considering to sell short lease property it is not all doom and gloom.
Let’s look at two options, two different ways that you can extend that lease.
Formal Application
This formal application will be made through a legal representation. This will involve an application to the freeholder under the Reform Housing Act. This process will bring the ground rent down to zero and will extend the lease by 99 years. This process, however can be lengthy so you will have to be patient while pursuing this route.
Infr
Now option 2, this is an informal request to the freeholder to enable the leaseholder to open negotiations with the freeholder. However, unlike option 1 the freeholder is not obliged to respond. So, if you’re not getting anywhere with this option you may want to revert to option 1.
In Summary
If you are selling short lease property then it would be advisable for you to start early. Then, use some of the options that we have mentioned. If on the other hand, you are purchasing short lease property. Then, you need to consider all of the things that we mentioned above.
Most lenders do not lend on short properties, which means that your options will be restricted to the number of lenders that you can approach. You may also incur additional costs and spend a considerable amount of time (months/years) getting the lease extension approved.
As a rule our company does not generally buy properties with leases we try to avoid them. In fact I think we have only one in our portfolio at the moment. Despite that, we do offer options and suggestions that could help you to either extend your lease or to sell your property with a short lease. Feel free to contact us via the contact link.
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