Selling a Leasehold Property

What is a leasehold property?

Leaseholds are not the same as freeholds, which are properties where you own the building and the land it sits on outright. It’s generally considered easier to sell a freehold property because of the outright ownership, but that doesn’t mean you can’t attempt to sell a leasehold property.

If you own a leaseholder property that means you own a house or flat on land that somebody else owns. You will sign a contract with the freeholder who will allow you to live in the home for a certain duration of time in exchange for an annual rent. However, in the case of short lease houses and flats, at the end of the leasehold term the ownership of the property may return to the freeholder unless you extend your lease. Further information regarding leasehold extensions can be found on the website of The Leasehold Advisory Service.

It’s said that most of the flats throughout England and Wales are leasehold properties, so if you live in a flat then there’s a very good chance you are under a leasehold agreement.

The duration of most leasehold agreements last for 99 years, although they can sometimes be much shorter at 40 years or much long at up to 999 years in certain cases.

What is the process of selling a leasehold property?

You can expect the process of selling a leasehold flat or house to be a little more complicated than selling a freehold property, so expect it to require more time and paperwork.

First, you need to find out much time is left on your leasehold agreement because the shorter the remaining duration, the less attractive it will be to a prospective buyer.

When you try to sell your leasehold it’s crucial that you know all of the terms of the remaining agreement, because the purchaser will have to comply with all of these requirements. This process is called “assignment” and you’ll find that most leasehold agreements include assignment clauses detailing how the sale process should work. This can be a complicated process, which is why you should hire a solicitor to help with it.

After you have your various pieces of paperwork in order you need to decide which option you’re going to choose for selling your home, including through an estate agent or selling to a quick property buying company that will give you a fast sale of your home.

Because leasehold agreements might be less desirable to home-hunters than freehold homes, you might want to enlist the help of an estate agent who can help to market your property. They will create a listing and promote the home, and also hold viewings of your place. But there’s no deadline for when houses sold this way might sell, and you’ll also have to pay the estate agent fees, so it’s not a great solution if saving time and money are your major concerns.

Alternatively, you could try contacting a company that promises to make a swift purchase of your home for a competitive cash amount. These businesses specialise in helping to accelerate the sale process, and they won’t be turned off by the fact that it’s a leasehold home. Another benefit is that you won’t typically have to pay these businesses any fees to sell to them.

Potential challenges owners may face when selling a leasehold home

No matter the size, type of other attributes of your leasehold property, there can be one or more complications involved with trying to sell this type of home – particularly when compared to freehold homes, where you would be selling the legal right to the building and its land outright.
Discovering and understanding these various possible hurdles can be useful for leasehold property owners to help them realise why they might be struggling to attract buyers.
Absent freeholder: If you are unable to get in touch with the freehold owner of your property, they are known as an absent freeholder and this can make it harder to sell your house or flat. That’s because buyers may have concerns about where their fees will be going and other issues with this situation.
Expensive fees: Leaseholders may have to pay a number of costly fees including ground rent, service charges and more each year, which will be specified in the lease agreement signed with the freeholder. If these charges combined end up costing a lot of money then this could make some buyers lose interest if they have a limited budget for buying their next home.
Restrictive lease: This problem will be case-specific to your individual leasehold agreement, but it might continue various provisions that place significant restrictions on what you can do both with your property and the common areas of the building in which it is located. If these terms are too onerous then you may find that they have the effect of discouraging buyers.
Cladding concerns: Cladding is a type of construction material that became notorious because its presence is believed to have played a major role in the June 2017 Grenfell Tower block in London. If your leasehold flat or other property has cladding then this might be enough to cause some prospective buyers to lose interest because of safety worries about it.
Short lease: Another common worry among potential homebuyers is whether the property has a short duration left on the leasehold agreement. Any lease that has less than 80 years to go is considered a short lease that may be harder to sell and more difficult for buyers to get approved for a mortgage to purchase the property, as MoneySavingExpert says.

Four strategies to find a buyer for your leasehold flat or house

Once you are at the stage of being ready to find a buyer for your leasehold property, your next decision will be which approach to use for selling the home. The four usual options are selling with an estate agent, selling to LDN Properties or another quick buyer, selling with an auctioneer or selling on your own, which means without the help of an auctioneer or estate agent.
As you can see from the information about all four options below, some have prominent advantages and others have major disadvantages. For example, when you sell to LDN Properties the entire timeline should only be a few short weeks, whereas if you choose to sell without any assistance or with an estate agent then it might take more than a full year.
Consider noting down your top aims with selling, including your ideal sale price, whether you are open to paying any commission, how long you are willing to wait before selling and more. Then compare these facts against the four methods below to find the one best suited to your needs.

Selling with an estate agent

With this traditional method of selling a leasehold home the estate agent will first create a listing that features photographs of the interior and exterior of your property and describes its main features. They will advertise this listing in local newspapers, online and in their office, followed by arranging viewings to give buyers tours of your home, and finally hearing any offers.
For putting in all of this effort, the typical estate agent will charge you commission if they manage to sell your home, and this is usually at a rate between 1.15 percent and 1.40 percent of the property’s final sale price, although it may be lower or higher than this. This fee will add to your expenses because it will be subtracted immediately from the sale proceeds.
Selling with an estate agent can take many months or longer, and there’s always the danger that a buyer makes an offer but then a few days or weeks later changes their mind and rescinds it – and if contracts are not yet exchanged, they can do this without any penalty. This would also delay a sale much longer because you would need to start afresh with seeking a buyer.
One situation that can occur when selling this way is that an estate agent will give you a very high quote for the price at which they think your property can sell, despite secretly knowing that you will only get offers at a much lower value. This trick aims to have you agree to sell using the estate agent’s services, so they can benefit from the fees they’ll charge if they find a buyer.
You can prevent falling for this manoeuvre fairly easily and at no cost, first by asking many estate agents to provide you with a no-obligation and free sale price quote for your home. Next, visit property sales websites such as Rightmove and Zoopla and write down the present and recent past sale prices of homes like yours in the same area. Finally, calculate the average of all these values and this will be a better rough estimate of your home’s potential sale price.

Selling to a quick home buyer

LDN Properties is a quick buyer, which means that we have the funds needed available upfront to purchase your leasehold property, with no waiting for weeks or months to initially get approved for a mortgage to pay for the transaction. This cuts our typical timeline for completing the purchase of almost any house or flat down to just a number of weeks.
Another great perk of selling to a quick buyer is that you will not have to pay any commission, which means you are guaranteed to receive the full proceeds from your home’s final sale price. This compares favourably to selling with an estate agent or an auctioneer because those two approaches charge commission and it will be subtracted from the final sale proceeds right away.
Quick buyers are also a good option if your flat or house has any type of problem that is discouraging other buyers, whether that’s legal complications, general issues like noisy neighbours or structural flaws such as subsidence or damp. You’ll still get a fair and fast offer from LDN Properties for your home when selling it “as is” without first fixing such problems.
Make sure you check if your quick buyer is registered with The Property Ombudsman (TPO), which is an independent organisation that publishes policies to shield homeowners from scams in the quick buying industry. Only sell your house or flat to a genuine TPO member like LDN Properties, as a non-TPO quick buyer might be fraudulent.

Selling with an auctioneer

You could try a property auction when attempting to sell your leasehold home, which works much the same way as auction for other items – people will have the chance to place bids of ever-increasing value on the property. Your aim is to have several interested buyers trying to outbid each other so that it pushes the final sale price high, resulting in a decent profit.
Yet there is promise that this outcome will occur, and indeed you may get no bids on your home, meaning it doesn’t sell. You would need to start again with the process of trying to find a buyer, possibly adding many more weeks or months to your overall selling schedule.
Alternatively, you might get just one bid at the reserve price, which is the lowest value that you agree to sell your home in the auction. A bid at this price is a binding legal agreement to sell the property, and the buyer/bidder can sue you to enforce the sale if you try to abandon it. For that reason, you must devise a reserve price that is projected to earn a profit from the sale, even after you have paid the auctioneer their commission. If you don’t do this then you could end up selling at a loss or just breaking even by selling at a price close to what you paid for the home.
To help with planning your reserve price, it can be useful to know that many auctioneers set their rate of commission at 2.5 percent of a property’s auction sale price. This fee is subtracted from the final sale proceeds immediately, so this will increase your total expenses.
You could ask auctioneers if they are open to either having the buyer pay a share of your costs or to reduce the rate of commission that they will charge you, as this can lower your expenses. Just be warned that some auctioneers could charge even higher fees than 2.5 percent.
It is also important to know that this is a slow way to sell your home, and there will be a wait of many weeks or even months from when you choose this method and when the auction takes place. Should your property sell, the winning bidder then has about 28 days to complete all of the tasks needed to finalise the purchase, such as signing the required documents.
To speed up the sale of your property, you can inquire with auctioneers about whether they are open to imposing a shorter deadline on the buyer to finish all of their mandatory tasks. But note that certain auctioneers might have a default policy of giving them even more than 28 days.

Selling on your own

This approach to selling a leasehold flat or house puts the onus on the seller to handle every step of the process, from first making a listing through to advertising it, scheduling viewings and hearing offers from buyers. It’s a very stressful way to sell a home and all of the tasks can easily take up all of your free time, possibly lasting for many months or longer.
For this reason alone, it is often recommended that the only people who should sell without any help are those that have prior experience with selling a leasehold property, or that have a qualified friend or family member that is willing to help them with the sale for free.
Beyond the lengthy timeline and stress involved with selling on your own, there’s another problem in that a person could make a true offer on the home but then later decide against it, withdrawing the offer and causing the sale to fall apart. They can do this and not be subject to any penalties, so long as the contracts have not been exchanged yet. And it will add much more time to your selling schedule, as you will need to begin again with trying to find a buyer.
One of the only obvious benefits of selling this way is that you would avoid having to pay commission to an estate agent or an auctioneer, which helps reduce your costs. But you may find this saving is cancelled out by the money you spend on advertising your listing and more.
As an alternative, you might want to think about getting in touch with a no-commission quick buyer like LDN Properties, because it provides a stress-free, streamlined and zero-hassle way to sell any type of home. We would help you attain the same goal of not having to pay any fees when selling your house or flat, but with the additional bonus of enjoying a much faster sale because the entire timeline should only be a few weeks from the beginning to the end.