A short lease makes it hard to sell a flat. Most lenders won’t lend to them. It’s not easy to sell a flat with a short lease. Lenders tend to be reluctant to lend to them.
What Is A Short-Term Rental Agreement?
If you are living in a rental property (either a house/flat), then the owner is entitled to the building, and you can enter into a leasehold deal with them, known as a freeholder. The lease will outline the time period that you are entitled to live in the property. In return, the freeholder agrees to pay a regular ground rental amount.
Leasing agreements usually last for 99 years, although some leases may go on for as long as 125 years. A short lease can be defined as one with less than 70 years remaining. However, some mortgage lenders say that a short leasing agreement is one that has less than 70 years left.
Why Is It So Difficult To Sell A House With A Very Short Lease?
Because leases have a depreciating asset, lenders will be reluctant to lend money on properties with less than 70years remaining.
Extend Your Lease
The easiest solution will be to simply extend the lease before the flat is put on the market. Unfortunately, it’s not the cheapest solution. The longer the lease extensions last, the more expensive they will become. Leases less than 80 years old will have “marriage value.” This is the cost of any increase in the property’s worth that was incurred due to lease extensions. This amount can be exchanged for the extension of the lease by the freeholder.
You can serve a Section42 notice to your landlord to let them know that you would like to extend the lease. After receiving a response from your landlord, you will be able to negotiate the price of your premium.
Get an Informal Extension to Your Lease
If your premium is prohibitively high, it might be worth asking your freeholder for an informal Lease Extension. The landlord is not required to extend the informal lease, but it is worth asking.
For a low premium, don’t accept poor terms. Many lenders won’t lend on properties with ground rents that accelerate quickly. It’s a mistake to accept unreasonable ground rent terms. You will end up with another problem.
Sale at Auction
Although the auction does not guarantee that your property will go to auction, it can help you sell your short lease flat and with a shorter lease. It also gives you the chance of getting a good value for your property. Property that is difficult to sell through an Estate Agent tends to be sold at auction. This is because the property is not eligible for a mortgage. Auctions also offer buyers who are more likely to buy a short-term rental property. Investors who are looking for an affordable property to improve their portfolios often buy at auction. If the property is in a desirable spot, this may be a wise decision.
Our solicitors are available to assist you in selling your short-term property through auction. We can also help with the conveyancing process at the speed you need.
Find Cash Buyers
If all else fails, it is possible to find a cash purchaser who would be willing to purchase your property. Investors tend to be more inclined to have the cash available for a lease extension. Therefore, if your property makes sense as a rental investment, investors may be willing to purchase your property at a reduced price.