How to sell a flat with a short lease
Having a short lease is a common problem especially when you are looking to sell your flat. The reason being is due to your lease being granted for a number of years so as time goes by the term of the lease reduces. A flat with a shorter lease when compared to others at a time of rising prices will be less appealing to prospective purchasers.
There are, however, two ways in which you can ensure your flat is sellable in these circumstances.
Firstly, under the Leasehold Reform, Housing & Urban Development Act 1993, if you have owned the flat for two years and provided the lease was original granted for a term of 21 years, the lease can be extended by 90 years with a zero ground rent going forward in return for paying the freeholder a premium.
The additional 90 years is more than sufficient for a prospective purchaser and a zero ground rent is increasingly attractive. Unfortunately, the length of time to complete a statutory lease extension can take between 6 to 10 months.
To overcome this, the prospective purchaser can take over the statutory lease extension claim meaning on completion the purchaser steps into your shoes having owned the flat for two years. This is known as an assignment of a statutory lease extension claim.
There may be a reason why the prospective purchaser is not willing to be assigned the lease extension claim. For instance, if the purchaser’s mortgage lender does not accept the short lease on completion or the purchaser itself does not want the hassle and costs of continuing the process once they have moved into the flat.
In these circumstances, an informal lease extension can be obtained from the freeholder, which not only circumvents the two year ownership criteria but also the time it takes to complete is far shorter.
An informal lease extension is therefore a sale friendly option which can accommodate the time frame of your sale. The lease extension is completed at the point of when your sale completes and as long as the proceeds of sale cover the lease extension costs, the monies will be used to pay for the lease extension seamlessly.
If you are in this situation and are looking to extend your lease then please contact either Robert Plant or Alex Rubin to discuss further.
Author: Alex Rubin