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If you own a leasehold flat then it is considered to have a short lease if there are less than 70 to 80 years remaining on the lease agreement. Short lease flats can sometimes be harder to sell than properties with much more time left on the lease agreement. But this guide walks you through the process of still being able to get a fair and fast offer for a short lease flat.
- When are flats considered to have short leases?
- How to find out the remaining time on your lease
- Why selling a short lease flat can be complicated
- Potential solutions for having a short lease at your flat
- Preparing your short lease flat for sale
- Will you pay Capital Gains Tax on the sale of your flat?
- Your options for selling a short lease flat
- Frequently asked questions about selling a short lease flat
When are flats considered to have short leases?
A leasehold flat is a situation where you are the individual owner of the unit for a specific number of years, typically between 99 and 999 years, as set out in a lease agreement that you sign with the freeholder, who is the owner of the block of flats and the land on which it was built, as Ideal Home explains. You will pay the freeholder a ground rent each year to live in your flat.
Although leases are signed for dozens or hundreds of years, there are many leasehold flats throughout the UK that are considered to have short leases remaining. Generally, this is considered to be any lease agreement that has less than 70 years left, but some mortgage lenders are now defining short lease flats as those with less than 80 years remaining.
The remaining number of years is crucially important to buyers and sellers because if your lease expires then the ownership of the flat will revert automatically back to the freeholder.
If you currently own a short lease flat but would like to sell it, you need to be aware of some potential extra hurdles that you might have to navigate with trying to find a buyer for this type of property. This guide walks you through the process of trying to sell a short lease flat, including tips on how to overcome these additional barriers and hopefully get a swift and competitive offer for your flat.
How to find out the remaining time on your lease
Before attempting to sell your leasehold flat it can be a good idea to confirm how much time is remaining on the lease agreement and whether it is considered to be a short lease.
The first, and easiest, way to do this is by getting in touch with the solicitor, estate agent or other third party that oversaw the sale of the leasehold flat to you. They should be able to quickly find of copy of the leasehold title that will specify how many years are left on the agreement. Just beware that estate agents may give this information for free but solicitors might charge you.
Alternatively, you could visit HM Land Registry, which is the UK government’s website for tracking the registration of properties in England and Wales. Once on the website you will be given a prompt to enter your flat’s address and if it is registered then you will next be given the option of accessing this information for a small fee, and then you’ll find out how long the lease has remaining.
Why selling a short lease flat can be complicated
Having a short lease on your flat can sometimes make it harder to attract buyers when you’re looking to sell it.
That’s because homes with short leases are not seen to be as desirable as those with much more time remaining on the lease agreement, because there’s always the risk that when the lease expires the freeholder might simply want to retake ownership of the home. If a lease agreement has, for example, just 25 years left then there’s no automatic guarantee that the next owner of the flat will be able to get an extension and own it for more than that time.
For many individual private buyers this uncertainty will be enough to make them lose interest in making an offer on your flat, and that’s one reason why it might be harder to sell.
Another reason why short lease flats can struggle to find buyers is that many mortgage providers will not look favourably on these properties. Private buyers that will need to obtain a loan in order to afford the cost of purchasing your flat are likely to get turned down by most lenders if the lease agreement is considered short. That’s because the lender will worry that the home could be difficult for them to sell in a situation where the next owner defaults on their mortgage and the company has to find a buyer for the property to recoup the remaining debt.
Potential solutions for having a short lease at your flat
Given the potential downside of trying to sell a short lease flat, one solution that you might want to consider is asking your freeholder to extend the time remaining on the lease agreement far beyond what would be considered to be a short lease left, as the HomeOwners Alliance notes. The starting point is often to serve a section 42 notice on your landlord.
But this can be complicated and lengthy process, and it can sometimes cost several thousand pounds to successfully go through the act of extending a lease agreement’s duration. Specialist guidance is often needed to ensure you make the correct decisions.
Another way to overcome the potential problem would be to get in touch with your freeholder and inquire whether they might be willing to sell the freehold of the block of flats to you and the other residents at the property. If you were to buy a share of the freehold then this would naturally eliminate the lease agreement and the problem of having a short lease at your flat.
Yet this can also be a very complicated solution and one that will require agreement from the other flat owners in the property, along with various other conditions being met. It’s likely that the timeline for this solution would still take many months, and if you’re trying to sell just your flat then you have may no interest in owning the freehold of the building.
A third, and simple, solution is to contact LDN Properties or another quick buyer that has plenty of experience with making competitive offers to buy short lease flats. They’ll not only give you a fair price but could complete the process of buying your flat in just a few very short weeks, and that includes how long it takes for exchanging contracts and paying you the proceeds.
Preparing your short lease flat for sale
There are a few steps involved in getting your short lease flat presentable for sale, and whilst some are quick and low-cost or zero-cost, other options can be much more expensive.
One issue to review is whether your flat has some significant problem that could deter buyers or at least make them reduce their price offers, and this typically means structural flaws like subsidence, dry rot, high levels of radon, storm damage and many other issues. If you try to sell the flat "as is" without fixing the problem then you’re likely to find that potential buyers will lower their price offer by the amount of money they think it will cost them to repair the issue.
Investing money, effort and time into fixing the flaw upfront before selling is one way to remove this barrier to selling, but it’s not always going to be something that every owner can afford.
If you don’t have the resources or desire to launch such extensive repair work on your flat before selling, you might still be able to get a swift and competitive offer for your property if you get in touch with a quick buying company like LDN Properties. These companies are known for making fast and fair offers for properties regardless of any major structural issues.
Regardless of any structural integrity problems with the flat, you should at least spend some energy and time on cleaning the inside of the property. This means removing any clutter from rooms, and if you have pets, tidy up after them and keep them secured during any viewings where prospective buyers can come and tour the inside and outside of the flat.
Your options for improving the exterior appearance of the block of flats might be limited but there may still be some steps you can take to fix any issues that are unique to your unit, such as giving the window ledges a new coat of paint and replacing any broken glass.
These seemingly simple steps can have an outsized impact on the sale of your flat, because a property that looks kept in good condition will be seen as more valuable by potential buyers.
Will you pay Capital Gains Tax on the sale of your flat?
Budgeting is a vital part of the home selling process, and this includes understanding the expenses that you might incur when trying to find a buyer for your flat. One of the major costs you could potentially face after selling is having to pay a share of Capital Gains Tax.
This tax is assessed based on the gain, or simply the profit, that someone makes when they sell a valuable physical asset like a flat, car, artwork or anything else, as This Is Money explains in a recent article.
Note however that you typically won’t have to pay this tax if you sell the flat break even, which means at a price that is similar to what you first paid for it, or if you have to sell at a loss compared to the original purchase price.
There are also certain other exemptions from Capital Gains Tax and additional knowledge or ways that you can reduce how much you owe, so you should ask a financial professional about these options.
Your options for selling a short lease flat
Whatever your reason for wanting to sell a short lease flat – whether that’s needing funds to resolve some financial difficulty, selling due to illness, wanting to upsize to a bigger property or any other reason – you will next need to decide which method to use for finding a buyer.
The four choices are selling to a quick buyer, selling at an auction, selling with an estate agent or selling without any help. There are unique perks associated with some of the options, for example quick buyers taking just a handful of weeks to finalise the purchase of your property. Other methods have major drawbacks, like auctioneers and estate agents charging high fees.
In order to identify which of these methods might be best for your selling needs, consider the information below on all four choices and see which one mostly closely matches your goals such as how fast you want to sell, your goal selling price, and whether you are willing to pay a third party any commission in order to secure a buyer for short lease flat.
Selling to a quick buyer
Quick buyers, like LDN Properties, have the funds available to make immediate purchases of leasehold and freehold homes no matter their age, condition, location, shape, size or type.
They don’t have to wait for many weeks or even months to first get approved for a mortgage that will pay for the costs of purchasing your property, and this speeds up the timeline significantly. Typically, a quick buyer should be able to complete the process of buying your home in a few short weeks, and that includes exchanging contracts and paying you the sale proceeds, which is much faster than any of the other options detailed in this section.
Another top advantage of selling to a quick buyer is that the honest companies will never make you pay any commission, which helps to keep your overall selling costs low. If your aim when selling is avoiding paying any fees then contacting a quick buyer is a great solution.
And because these companies are known for making offers to buy almost any type of property, they won’t look negatively on your flat just because it has a short lease. That means you’ll have a streamlined and no-hassle way to still get a competitive and rapid offer on your home.
Selling at an auction
Alternatively, you might want to consider selling your short lease flat an auction, where you will choose a reserve price, which is the lowest price at which you are open to selling your property, and then hopefully people will keep placing bids at ever-increasing values on the flat.
If you only get a single bid at the reserve price then this is a binding agreement to sell your flat and the buyer could sue you to enforce the sale if you try to back out of it. That’s why it’s imperative to opt for a reserve price that should still produce some profit from the sale even after you have paid the auctioneer the fees they will charge for selling your flat.
Usually auctioneers will make you pay commission based on your property’s sale price, and this will add to your expenses because it’ll be taken out of the sale proceeds right away. They charge this fee for the work of hosting the auction and also developing and advertising a listing which describes your flat and features photographs of the property’s interior and exterior.
You could ask individual auctioneers if they might be willing to lower their rate of commission or have the buyer pay some of your costs, although there is no guarantee this will happen.
This is not the speediest way to sell a flat because it will take many months, including a delay between when you list the flat for sale and when the auction occurs. Then, if your home does sell, the buyer often has about 28 days to complete all of their required legal paperwork and the other necessary steps to finalise the purchase of your short lease flat.
Selling with an estate agent
Or you might want to sell your short lease flat using an estate agent, which can be a good way to avoid having to do much work with selling the property. That’s because the estate agent will handle everything, including advertising the home and hearing offers from buyers.
But even though this method doesn’t require much effort on your behalf, it can still be quite stressful because it can take more than a year before you get a genuine offer. And remember that someone can withdraw an offer without any penalty right up until contracts are exchanged, which would then force a further delay by making you start over with looking for a buyer.
Estate agents will also make you pay commission if they manage to sell your home, and this is usually charged based on the sale price you are able to get for the property. This will increase your total selling expenses because the commission will be subtracted immediately from the eventual sale proceeds.
Selling without any help
The final option is to sell without any help, which means that you will have to do all of the work involved with trying to find a buyer – everything including developing a listing, advertising it, scheduling and leading viewings, and fielding serious offers from buyers.
This can be a stressful and time-consuming process and you won’t be able to count on just using your spare time to do this, and it may take more than an entire year before you get a genuine offer from a buyer. That’s why it’s only suggested as an option for people who have experience selling homes or have a friend or family member that has such experience and might be willing to help you out for free with trying to find a buyer for your flat.
Not having to rely on a third party to sell your home means that you won’t have to pay any commission, which can help to lower your selling expenses. But you will face other costs, such as for advertising the listing, that could wipe out any saving you may make with this method.
Instead, you could think about contacting a no-fee quick buyer like LDN Properties, because they don’t charge commission and that way you can still avoid paying fees – but with the added benefit of securing a sale much quicker. These companies are known for completing the purchase of properties within weeks, which is much speedier than trying to sell a flat on your own.
Top queries and answers about selling a short lease flat
Homeowners thinking of selling their flat quickly sometimes have questions that need answering, ranging from the level of repair work they should do before selling through to selling a flat with high service charge. Here are some of the top questions we’re asked about selling a short lease flat:
Your top questions when selling a short lease flat
When you purchase a leasehold flat you will sign an agreement with the freeholder who owns the block of flats in which the unit is situated, and the land on which it is located. Lease agreements typically last from 99 to 999 years but they are considered to be short if they have less than 70 years remaining, or less than 80 years in the view of some mortgage lenders.
Because these properties are seen as less desirable for buyers than flats which have many years left on the lease agreement. If the person that buys your flat then defaults on the mortgage, the lender might have concerns that the unit will be difficult to sell because of the short lease and then they may struggle to recoup the remaining debt they’re owed.
It’s certainly an option but you should be aware that the process of trying to extend a lease agreement with a freeholder can take a very long time and also cost thousands of pounds. That won’t be a great solution for those owners of a flat who need to sell quickly and who do not want to incur any more costs before they attempt to find a buyer for the property.
If your flat has an issue like dry rot or damp and you would like to spend time, effort and money on fixing it before selling then this can be one way to avoid buyers viewing the property as less valuable. However, many owners simply won’t have the resources to do this work, and so you they should sell to a quick buyer who can give them a competitive and swift offer.
If you lose money on the sale compared to your initial purchase price then you typically won’t pay any Capital Gains Tax, and the same often applies if you break even by selling it close to the price that you first paid for the property. Make sure you obtain professional tax advice with regard to Capital Gains Tax.
Selling via an estate agent or auctioneer both require that you them commission for finding a buyer for your short lease flat, and this will increase your selling costs because the fee will be deducted from the final sale proceeds. By contrast, you won’t have to pay any fees if you sell on your own or you sell to an honest no-commission quick buyer such as LDN Properties.
The speediest way to find a buyer for your short lease flat can be to contact a quick buyer, because these companies have the funds available to buy homes immediately and they can finalise the process of buying your home within weeks. But if you decide to sell on your own, via an auction or with an estate agent then you can expect the timeline to be at least many months.
