Published on: 14 Jan 2019
Property owners and prospective buyers are in limbo as the government is still debating new rules surrounding leaseholds.
As owners and buyers know, the number of years left on a leasehold plays an important part in being accepted for a mortgage or selling a property. If the leasehold term falls under 70 years, most buyers will face serious issues finding a mortgage. This affects sellers too as they have to focus on selling to cash buyers.
The government is currently reviewing the process of extending a lease or buying the freehold. The new process is expected to be made cheaper and easier.
A complicated and costly process
Currently, extending a leasehold is a complicated and costly process, with the cost going up sharply after the lease falls under 80 years. The 1993 Leasehold Reform Act allows flat owners who have owned their flat for at least two years to extend their lease by 90 years and have the ground rent reduced to zero. Homeowners can add 50 years on their lease, but in some cases, it is better to buy the freehold instead.
Owners are currently in a dilemma: should they extend the lease or buy the freehold and pick up the tab, including the fee, plus the solicitor fee and premiums or wait and see what the Law Commission is going to decide? Buyers, on the other hand, may be reticent to put an offer on a property with a shorter lease given the government’s recommendations are not yet known.
Wait for a better deal or go for what is on the table now? It all depends on how long you’ve got left on your lease, according to leasehold expert Louise Burns in The Guardian. According to Burns, ‘If you have a physical need to extend your lease, say your lease is approaching the 80-year mark or you need to sell, then you should consider taking action now. If not, our advice is that it would be prudent to wait for the outcome of the Law Commission’s proposals.’
Depending on your circumstances, you might want to spend some money and be on the safe side, or wait out and see if the Government’s new deal is better for you.
Both buyers and sellers will hope the new rules will save them plenty of time and money.
Back to news