Some properties, most commonly flats and maisonettes, are leasehold. This means they have a legal agreement called a lease, which allows you to own the property for a fixed amount of time. The lease is issued by the freeholder or ‘landlord’ and when this time expires, ownership of the property returns back to them. So what happens if you have a property with a short lease and need to sell?

What is considered a short lease?

Leases are typically issued for between 99 and 999 years. Although it sounds a long time, a lease of 70 years or less is considered ‘short’ by mortgage lenders and buyers. In some cases, a lease of less than 80 years is also considered an issue.

Why do short leases make it harder to sell?

Short leases can be a deal breaker for buyers for several reasons. Extending a lease can be an expensive and time consuming exercise – often costing the homeowner thousands of pounds. Prospective buyers of short lease properties will have to factor in the cost of a lease extension when making purchasing decisions – an aspect that can put them off a property completely. If a buyer can’t afford to extend the lease – or the seller won’t extend it on their behalf – a mortgage lender will probably refuse to loan against the property if there’s less than 80 years left.

Why are properties with short leases unmortgage-able?

The value of a property plummets as the lease gets shorter. At the same time, the cost to extend the lease increases as the remaining time diminishes, also lessening the appeal of the property. Sadly, High Street lenders are less willing to lend on a property that is losing value every day the lease is not extended. For sellers using the open market, it can be a vicious circle with every day the property isn’t sold costing hundreds of pounds.

Will a change in the law help?

You may have heard that the law surrounding leaseholds is changing but this only relates to new leases that will be issued in the future and not existing leases. Whilst the Government is consulting on a second Bill to hopefully make it easier and cheaper for leaseholders to buy the freehold of their property – or make it easier and cheaper to extend their current lease - it will be a long time before anything becomes law. If you are an existing leaseholder with a short lease needing to sell property fast, the change in law won’t help for the foreseeable future.

We can buy your short lease property

Open Property Group will buy any leasehold property, no matter how long the lease has left to run. We’ll even make you a cash offer if an estate agent or mortgage lender has refused to do business with you. You can start the process now by filling out our online form here.

If you’d like to discuss your short lease property in more detail, the LandlordBuyer team is waiting with free, impartial advice. Get in touch today.

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