Can Leaseholders Be Forced to Sell? Property Wealth Insider

The rising popularity of serviced apartments attracts guests seeking hotel-like comforts while maintaining their privacy. To stand out among the competition and increase profitability, it’s crucial to enhance your marketing strategies for your multiple properties in town.

Selling a leasehold property differs slightly from selling one on a freehold basis, requiring additional documentation and potentially the services of a solicitor experienced in leasehold sales.

According to Rob Smith, Managing Director of Parkers, the process might seem daunting, but with the right approach and assistance, it can be manageable. Smith emphasizes that understanding the nuances of selling a leasehold flat or apartment is crucial.

To navigate potential hurdles effectively, this guide provides comprehensive information on what sellers need to know when selling a leasehold property.

What is a leasehold property?

In the UK, most flats, apartments, and Shared Ownership houses are owned on a leasehold basis. This means you own the property itself, but the land it stands on and communal areas are owned by a freeholder.

As a leaseholder, you’ll typically pay ground rent and a service charge to the freeholder, who uses these funds for maintaining the common areas and the building.

Leasehold properties come with a lease term, determining how long you have the right to stay in the property before ownership reverts to the freeholder. However, extending a lease is a statutory right for all leaseholders, provided you’ve owned the property for at least two years.

Can you sell a leasehold property?

Selling a leasehold property mirrors the typical process of selling any other type of property. When you sell, the lease agreement and its terms are passed on to the new owner. This means that the new owner must comply with the obligations outlined in the lease and fulfill any financial commitments laid out by the freeholder.

The terms of the lease, including any ground rent or service charges, are binding on the new owner upon the transfer of ownership. It’s essential for both the seller and the buyer to understand these terms and obligations before completing the sale transaction.

Is it hard to sell a leasehold property?

Selling a leasehold property may present more challenges compared to selling a freehold home due to the involvement of a lease agreement. However, if your lease has considerable length remaining and you have all the necessary documentation prepared for potential buyers, there’s no need to worry about selling your property.

Having a long lease term and having all essential documents readily available can streamline the selling process and reassure buyers about the property’s tenure and legal standing. With proper preparation and understanding of the leasehold terms, selling a leasehold property can be as straightforward as selling any other type of property.

How to sell a leasehold property

Before listing your leasehold property for sale, there are several essential steps you must take:

Find out your property’s value: To accurately gauge the market value of your leasehold property, it’s crucial to enlist the expertise of a local estate agent. They’ll conduct a comprehensive assessment, considering recent sale prices of similar properties in your area and current market trends. Additionally, they’ll factor in any upgrades or renovations you’ve undertaken to provide a precise valuation. Armed with this information, you can confidently determine an appropriate asking price for your property, maximizing its potential in the market.
Study your lease and check how long is left: Selling a leasehold property entails understanding the intricacies of your lease agreement, particularly the remaining lease term. Take the time to thoroughly review the terms and conditions outlined in your lease document. Pay close attention to the length of time remaining on your lease, as this significantly impacts your property’s marketability and value. Generally, properties with longer lease terms are more desirable to prospective buyers, as they offer greater security and flexibility. Conversely, leases with less than 80 years remaining are considered ‘short,’ potentially diminishing your property’s appeal and complicating the selling process. It’s essential to be aware of these factors and their implications for potential buyers, including potential challenges with mortgage approvals.
Get your documentation in order: Selling your leasehold property involves gathering essential documentation to streamline the process for potential buyers. Key documents include a copy of your lease agreement and a leasehold information pack or TA7 form. This pack contains comprehensive details required by the buyer’s solicitor, covering aspects such as service charges, ground rent fees, maintenance costs, and planned building works. Since leasehold packs are typically provided by the freeholder, ensure timely access to this information before listing your property for sale. For Shared Ownership properties, the selling process may differ slightly, requiring specific documentation outlined in our Shared Ownership guide.
Consult with your local agent: Once you’ve assembled your documentation and verified the adequacy of your lease term, it’s advisable to engage with your local estate agent to initiate the sales process. Seek out an agent experienced in handling leasehold properties, as they can offer valuable insights and guidance tailored to your situation. Collaborating with a knowledgeable agent ensures a smoother selling experience and maximizes your property’s market potential. They’ll assist you throughout the sales journey, from setting an optimal listing price to navigating negotiations and finalizing the sale.
Select a suitable solicitor: Engage the services of a competent solicitor or conveyancer well-versed in handling leasehold property transactions. An experienced professional can effectively navigate any complexities that may arise during the sale process. In case of lease-related issues or requests for detailed information from the buyer’s solicitor, a proficient leasehold solicitor will provide invaluable assistance, ensuring a smooth and efficient sale.

What to do if you have a short lease

If your property lease has less than 80 years remaining, it doesn’t necessarily render your property unsellable. You still have several options to consider:

Consider extending the lease: If you’ve owned your leasehold property for over two years, you’re legally entitled to request a lease extension. This process involves negotiating with the freeholder to prolong the lease duration. The cost and complexity of extending the lease can vary, depending on factors such as property value and remaining lease duration. Seeking advice from a solicitor experienced in leasehold matters is essential to navigate the process effectively. They can provide guidance on your rights, the associated costs, and the best approach to take based on your circumstances.
Explore freehold purchase: Another option to consider is purchasing the freehold of your property, either individually or collectively with other leaseholders in the building. Acquiring the freehold grants you greater control and ownership rights over the property and eliminates the need to pay ground rent to the freeholder. However, this decision requires careful consideration, as it comes with added responsibilities and potential complexities. Consulting with a solicitor who specializes in property law can help you understand the implications of freehold purchase, assess the feasibility of collective freehold acquisition, and navigate the legal processes involved.

What’s the timescale of selling a leasehold property?

The conveyancing process for selling a leasehold property typically takes longer than for a freehold property. Leasehold conveyancing involves more extensive work for your solicitor and often triggers additional inquiries from potential buyers, which require responses from either you or your freeholder. While a straightforward leasehold sale may be completed within 10-12 weeks, more complex cases can extend the timeline further.

Can a freeholder force a leaseholder to sell?

A freeholder cannot compel a leaseholder to sell their property as long as the lease terms are upheld and there’s sufficient time left on the agreement. However, if a leaseholder violates the lease terms, the freeholder may pursue forfeiture action. Not all leases permit forfeiture proceedings. Some leases include a Licence to Assign clause, requiring the freeholder’s consent for property sale. Yet, in most instances, leaseholders can sell to any buyer, who then assumes residency based on the lease terms.