Selling your property can be a stressful time as it is, so the added worry about whether your lease makes your property harder to sell can be daunting. Read on to find out how enfranchising can help…
A leasehold is temporary ownership of the land in which a property you lease sits. So, with a leasehold property, you only own it for a set period of time based on the length of this temporary land ownership set out in the lease.
Leasehold enfranchisement is the process you go through to either extend your lease or purchase a share of the freehold. Leasehold enfranchisement is a complicated area of law. Leasehold enfranchisement solicitors are your best bet if you are looking to extend your lease or purchase the freehold of your leasehold property.
You can ask the landlord to sell you the leasehold at any time, as long as you have lived in the property for at least two years. In this article, we discuss the pros and cons of enfranchising your leasehold property. Take a look…
Pros of Lease Enfranchisement
Buyers will be exempt from ground rent and service charges
Generally, buyers are more attracted to flats that come with a share of the freehold even if the property has a long lease. One of the benefits of this is that the buyer will be exempt from ground rent and service charges, which is something they need to consider for affordability when purchasing a leasehold property.
You can collectively buy the freehold
Due to the Leasehold Reform under the Housing and Urban Development Act 1993, leaseholders who meet a certain set of criteria can buy the freehold together. This can make the process and responsibility seem less daunting.
In some cases, not everyone will want to be involved in a collective enfranchisement (see more about the cons below). Luckily, you only need 50 percent of leaseholders on board to form this.
One of the big perks with a collective enfranchisement is that, when it comes to renewing the lease, it should be free.
You don’t have to complete the process before you sell. You and your buyer can make a leasehold enfranchisement as part of your negotiation when going through the process. This means that, if you start the enfranchisement process before the sale is completed, you can pass this on to the buyer who can continue the legal action rather than waiting the two years to become eligible to extend the lease. This will help to keep renewing the lease cheaper so might be more desirable for a buyer.
It’s easier for buyers to get a mortgage
The Home Owners Alliance states that most mortgage lenders will not lend on a property with a lease that is under 70 years. Some mortgage lenders, for example Nationwide, have stricter policies on who they will lend money to in regard to leasehold properties.
This means that you might be cutting out a huge market for your property by not enfranchising your leasehold property. For those cash buyers who will still be eligible to buy a leasehold property with a short lease, they will expect to pay less for the property as they will know you are in a sticky situation.
By extending the lease, or purchasing a share of the freehold, you are protecting the value of your investment for longer.
Cons of Leasehold Enfranchisement
Selling a leasehold property is simpler than it looks
The process of selling a leasehold property has been said to be less complicated than it has a reputation for. All it takes is a little planning and few additional documents.
There is guidance out there that will help you understand your lease, how it affects the sale of your home, and how to get your property on the market for the best price possible.
Buying a freehold isn’t the cure-all solution
Acquiring the freehold is just the start, because managing a building is a complex task. It means learning laws and regulations, taking on day-to-day responsibilities of managing the running of a business, or hiring the right people to do these jobs. It takes a lot of time and effort.
Disputes can arise
Disputes between co-freeholders are a common issue that arise. And the most awkward thing about this is that a lot of your co-freeholders are likely to be your neighbours. From chasing late payments, to disagreeing on a vote, it can lead to tension which might be more than you asked for.
So, will enfranchising my leasehold property make it more sellable?
Enfranchising your property definitely has its pros, and might make your property more sellable. That said, it won’t be everyone’s cup of tea.
Make sure to liaise with a leasehold enfranchisement solicitor and an estate agent before making your final decision. They will have know into the market and what you can expect.
If you have any top tips on making the decision to enfranchise your leasehold property, let us know in the comments below.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained property professional. Be sure to consult a property professional if you’re seeking advice about your leasehold property. We are not liable for risks or issues associated with using or acting upon the information on this site.