Should I extend the lease or buy the freehold before selling?

Should I extend the lease or buy the freehold before selling?

0:01 AM, 31st January 2025, About 3 weeks ago 7

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Hi, I am looking to sell my vacant leasehold BTL terraced house, and the lease has just over 84 years remaining. The estate agents are advising me to extend the lease due to ‘lenders’ requirements.’

I was going to sell it as it is, which reflects in the asking price but also thinking to buy the freehold via the formal route, as my request via the informal route has been declined.

I have a few questions: Are buyers still able to get mortgages with an 84 year lease?

Also if/when I start the process of purchasing my freehold can the completion be transferred to the buyer? Or does the freehold purchase need to be completed before I can sell?

Any advice would be appreciated.

Many thanks,

C


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Rod

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10:39 AM, 31st January 2025, About 2 weeks ago

The recent Leasehold and Freehold Reform Act brought in several changes.

As of today, 31 January 2025, leaseholders no longer have to have owned the property for two years in order to apply to the freeholder to extend the lease.
https://www.lease-advice.org/news-item/leasehold-reform-abolition-of-the-two-year-rule/

The other key change was that the extension is now to 990 years with no ground rent.

Previously, a seller would often make the application and assign their right to the buyer, allowing them to carry out the lease extension.

The advantage of selling without the extension is that, although the sale may be at a slightly lower price, you will pay lower fees and the buyer will pay less SDLT. It also avoids the need for you to have to invest in the lease extension, and associated costs, when at best it will probably only return the cost with no uplift.

Judith Wordsworth

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10:56 AM, 31st January 2025, About 2 weeks ago

If a buyer cannot obtain a mortgage as the lease is too short you may either have to extend the lease once a buyer is found, but can add the cost for extending on to the purchase price or negotiate a reduction or split the cost; or buy the Freehold which will take time to register and with all the freeholder obligations ie get new buildings insurance etc.

Freda Blogs

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12:44 PM, 31st January 2025, About 2 weeks ago

Whether to extend will be influenced by your target market. Many purchasers will be put off by the perceived complexities and costs of extending themselves, and they may be discouraged by their solictors and mortgage providers.

However in a market for property investors or individuals who are not fearful about such things an unextended lease represents an opportunity.

The identity of the freeholder could also be relevant and whether or not they comply with their responsibilities and don’t allow the area to look neglected.

C Lane

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15:01 PM, 31st January 2025, About 2 weeks ago

I agree with making a decison when a buyer is found. As my property is a leasehold terrace house, as the owner, I have the right to buy the freehold from the Freehold (a private company) and the process does not seem straight forward. So far none of the estate agents seem to understand most the points mentioned above (as they see my property as a leasehold flat) and I am wondering whether it is wise to let them know that the potential buyer also has the option to buy the freehold? as I sense that would be a selling point but it may also put some buyers off if it was miscommunicated.

Crossed_Swords

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12:30 PM, 2nd February 2025, About 2 weeks ago

You need to establish if it is a house, in which case enfranchisement is straightforward. If it is described in the lease as a flat, then it is a flat, the key provisions being whether the walls, roof and other structures belong to the property or are communal. It may look like a terraced house but there is case law that establishes it is a flat if the walls etc., are communal and the appropriate legislation that applies is for flats

Lewis Ellsum

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17:14 PM, 2nd February 2025, About 2 weeks ago

We are in the same position. We have spoken to estate agents who say buying the freehold won't add value to our flat (it's got 170 years left on the lease), it might be more saleable for some buyers.

I was interested in the Judith's comment about insurance for freeholders flats?

The downstairs flat isn't interested in buying his freehold. Will this complicate matters?

Rod

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8:24 AM, 3rd February 2025, About 2 weeks ago

Reply to the comment left by Lewis Ellsum at 02/02/2025 - 17:14
Whether you buy the freehold or extend the lease, the foot dragging at HM Land Registry will trip you up, as it is not uncommon for title changes (including lease extensions) to take more than 9 months to show on the register. Lenders will insist on the register showing the relevant position, so once the change has been filed, you need to follow up and ask HMLR to expedite the registration to facilitate your sale.

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