In May 2019 the Property Ombudsman issued the revised Codes of Practice which widened the obligation of estate agents to share information relating to the sale of leasehold properties.
This means that it’s now more important than ever to be up to speed with the latest information when it comes to leaseholds. Here’s some advice I can give, after more than 20 years offering leasehold advice, on how to handle leasehold issues, to ease the process for all parties.
Offer reassurance, plainly
One of the biggest barriers to selling leasehold properties is the ability to be able to easily access information around buyers’ rights or confusing information being given. Depending on the particular concern of the buyer, it’s important to ensure that the most up-to-date and accurate facts are given to them and that they are communicated in a clear way, not stuffed full of legalese that only confuses people more. The FAQs on our website aim to do this and are a good place to start.
The 80-year rule
The magic number when it comes to the length of time left on a lease when a property is being sold is 80. If the lease is hovering around the 80-85-year mark then mortgage lenders may start to get cold feet, which could hold up the sale. However, if this is the case, it’s worth estate agents putting in the work to explore a statutory lease extension, or other options (such as buying the freehold – more info below) to reassure them. Make sure you are armed with lease-length information before taking any viewings on the property and communicate this to the potential buyers.
Scrutinise the terms of the lease
The National Trading Standards Estate Agency Team has outlined several points that buyers should expect to know early in the marketing of a leasehold property. Below is a non-exhaustive list of example information:
- The length of the lease
- The service charge amount
- The cost of ground rent
- If any major works are planned and if the leaseholder would be expected to contribute
- Terms within the lease that might affect the leaseholder’s planned use and enjoyment of the property.
If the current owner of the property being sold doesn’t have a copy of their lease, you can obtain one from the Land Registry; it costs £7 per copy. It’s useful for estate agents to do this so they can review the particulars of the property and ensure there is nothing in the lease that could be a barrier to the sale.
For example, if the potential buyer is looking to sublet the property in the future, there may be a clause in the lease preventing this. Buyers should also be aware that they will still need their solicitor to carry out the requisite title checks, in addition to this.
Buying the freehold
There are two main motivators for people to investigate buying the freehold for a leasehold property; firstly, if there’s a history of neglect of the building and therefore residents want to take control of the maintenance themselves, and secondly, if the number of years left on the lease is low.
If it’s a house sale then the buyer could look to purchase the entire freehold, or if it’s a flat, then a share of the freehold. If you’re able to find out who owns the freehold then it could be worth sounding them out to consider if they would be willing to sell it and giving your client this option.
One of the ways to do this is by searching tribunal decisions on the freeholder’s name. Putting in this legwork for clients will offer added value to your service as well as providing more clarity.
In a challenging property market, being able to present vendors and buyers of leasehold properties with clear information from the very beginning of the sales process will surely help to get the sale over the line as quickly as possible.
By Nicholas Kissen, Senior Adviser at The Leasehold Advisory Service (LEASE).