Selling a leasehold property differs from selling a freehold property in a few key ways. You may face additional fees of service charges and ground rent paid to third parties such as management companies and the freeholder. Additionally, shorter leases can impact the selling price for a leasehold property, which is not an issue with freehold property.
This is the ultimate guide for individuals looking to sell a leasehold property. The content will cover the key steps in the leasehold property selling process, address the key legal considerations, and discuss the role of a leasehold solicitor in ensuring a smooth transaction.
We’ve written this for:
Leaseholders looking to sell their property
First-time leasehold property sellers
Legal professionals advising clients on leasehold sales
Property investors selling leasehold properties
Key steps in selling a leasehold property
When selling a leasehold property, you will need to understand your lease terms and be able to communicate these to buyers. Prospective buyers understandably want to know as much about a leasehold property as possible before considering an offer. They are more educated on the intricacies of leasehold properties than ever before and have many concerns and questions to help determine whether your property is a feasible home and investment for them.
When buying leasehold, buyers often ask about the remaining lease length, how much is due in ground rent and service charges to name a few common questions. Because of this, it helps to be familiar with this information and have a copy of the details that buyers commonly request to hand. Property solicitors can help review your lease to extract these details for you.
This information is often presented together in a leasehold information pack. Buyers often request them and if you have a managing agent in charge of your property the buyer’s solicitor will request this from them. Leasehold information packs also include important details about the property like any major works planned by the freeholder and any previous works.
Be proactive in providing a pack for buyers as chasing this information can often cause a delay in leasehold sales. As a seller, you’ll typically be charged by your leaseholder to provide this information, however chasing them to provide it is important as it can be the difference between a timely sale and unnecessary delays. It is also worth being aware of any queries the buyer’s solicitor has about the sale. This will give you the time you need to find out answers to their questions.
2. Valuing the property
Leasehold valuations are determined by taking into account factors such as the length of the lease and the condition of the property. The market value of the property is also considered along with its marriage value. This is the increase in the value that occurs when someone has two interests in a property.
Regarding lease length, leases with less time remaining on the lease are typically less valuable than similar properties with longer leases. The value of the property if it were let on the open market is also a factor of consideration. As are any deductions for properties let on assured shorthold tenancies.
Legal process for selling a leasehold property
Sellers need to follow a legal process to sell a leasehold property.
1. Instructing a leasehold solicitor
As with selling a freehold property, most sellers instruct a leasehold solicitor to act on their behalf in the leasehold selling process. Solicitors review the lease, liaise and negotiate with the freeholder to ensure the correct documents are provided, handle the exchange of contracts and process payments.
2. Responding to buyer inquiries
The seller’s solicitor also handles inquiries from the buyer’s solicitor regarding the lease, service charges, and any upcoming maintenance work.
3. Dealing with lease extension requirements
Many sellers choose to extend their lease before selling, particularly if the lease has fewer than 80 years remaining. This is because longer leases make it easier to sell a leasehold property.
Longer leases increase the value of a leasehold property as buyers are wary of buying a property with a short lease and being faced with the costs of having to extend the lease in the future. By marketing a leasehold property with a longer lease buyers are more willing to pay a higher purchase price as they can budget in the costs of extending a lease.
Buyer interest increases with longer term lengths and for buyers it’s practical to consider longer lease terms as mortgage providers may not provide mortgages for short leases, especially properties with fewer than 80 years remaining on their lease.
The process of a lease extension is managed with the assistance of a property solicitor who specialises in lease extensions and a surveyor. Solicitors can help sellers correctly serve a Section 42 Notice to inform the freeholder of their intention to extend the lease.
Surveyors assist sellers by valuing the lease extension and negotiating on price with the freeholder. The process of extending a lease can often take as long as 12 months, with 8-12 months being a common range. Without extending the lease, when short, sellers may receive lower offers and fewer interested buyers and be limited to cash sales and auctions.
3. Exchanging contracts and completion
The final stages of the selling process include exchanging contracts, transferring ownership, and completing the sale. When contracts have been exchanged sellers can no longer accept another offer. Both parties are bound to complete the sale, pulling out at this point is a breach of contract and will level financial penalties on the guilty party. Sellers may be able to sue buyers for damages if they pull out at this stage.
At the point of exchange, sellers agree a completion date with the buyer, usually about a week after the exchange of contracts. At this point, the sale is complete and the seller has to vacate the property.
Risks and considerations
Selling a leasehold property is more complex than a freehold property and it comes with risks. The main consideration when selling a leasehold property is the lease length. A short lease (fewer than 80 years remaining) can affect the sale price and buyer interest. Leaseholders have options to extend their lease before selling.
Disputes can arise over service charges, ground rent and any major works that are planned. These can delay the sale, so it’s important for sellers to mitigate these issues by providing a comprehensive leaseholder information pack for the buyer as soon as possible.
Sellers also need to be proactive and answer any inquiries that the buyer’s solicitor has in good time.
Here are some common questions seller’s solicitors have:
How long is left on the lease?
What is the service charge and ground rent?
Who is the freeholder?
What are the details of the building insurance?
Does the ground rent increase and by how much?
Are there any plans for major works?
Have any major works occurred since you’ve owned the property?
Costs and fees involved
There are several costs involved in selling a leasehold property. These include solicitor fees for conveyancing for leasehold properties, handling inquiries, and dealing with the freeholder. There are also fees from the freeholder and managing agent. The freeholder or managing agent may request payment for providing the leasehold information pack or dealing with the transfer of ownership.
Selling Leasehold: The Basics
How long does it take to sell a leasehold property?
Typically, it will take anywhere from a few weeks to a year to sell a leasehold property. Depending on the circumstances it could take be completed in as little as a week or over a year. It all depends on the responsiveness of the freeholder and managing agent. Commonly a chain-free sale won’t take longer than three months, however, when there are complications with the lease the timeline can lengthen.
How can a leaseholder extend their lease?
You can get a lease extension if you have owned their property for more than two years. Leaseholders have the opportunity to extend their lease by 90 years as a statutory right. As a leaseholder you can extend your lease formally under the law if you meet the statutory conditions, or by taking an informal route and asking the freeholder if they are willing to negotiate a lease extension.
Why choose Lawhive for leasehold property sales?
Here are the reasons leaseholders come to Lawhive property solicitors for expert advice:
Legal expertise – Our leasehold solicitors have a range of experience in handling leasehold property transactions, ensuring a smooth and legally compliant selling process for leaseholders. Our network of SRA-licensed solicitors can help you sell a leasehold property. All Lawhive solicitors are fully regulated and are specialists in their legal area, with at least 10+ years of experience
Combination of technology and legal expertise – Lawhive utilises technology to streamline the conveyancing process, making it easier and more cost-effective for clients selling leasehold properties. Lawhive is an online platform that lets you work with a licensed solicitor instantly online. By choosing to sell a leasehold property through Lawhive, you'll get updates from your solicitor from anywhere and be able to check on the status 24/7. You can exchange messages and files with your solicitor directly through the Lawhive platform, and access our support team whenever you need
Client-centric approach – we’re committed to providing tailored legal advice to ensure that leaseholders have a seamless and stress-free property sale experience
Sell leasehold property legal advice
The key steps when selling a leasehold property include obtaining a leaseholder information pack, getting your lease valued and extending shorter leases to boost the marketability of a property for sale. It’s a complex and sometimes lengthy process that will require the guidance of professional legal advice for a smooth transaction without delays, or the possibility of disputes between sellers and buyers.
If you’re looking to sell your leasehold property with minimal fuss our expert property solicitors will ensure your leasehold property sale is handled professionally and without complications. Get in touch with us today to book your free case assessment and discuss your circumstances.