Wanting to add more value to your leasehold property when it has a short-term lease? We’ll explore some ways to do this, here…
Leasehold properties are a great way to get on the property ladder, as they can often be cheaper than a house. However, having a lease on a property can restrict its value, making it less desirable for prospective buyers.
The question is, if your property’s lease is short-term, how can you add more value to it in order to make it more sellable? Well, there are various types of leasehold extensions out there, which we’ll be discussing in this article.
However, if this isn’t something you want to go through with your property, there are various other options out there. We’ll be diving into these potential options and ideas in this article, so read on for more…
1. Consider Getting a Leasehold Extension
In general, when the term on a lease falls below 80 years, various mortgage lenders will refuse to grant a mortgage on the property. This has a large impact on the value of the property, as well as its saleability. After all, in 2015, just under 50 percent of homes in the UK had a mortgage, so these sorts of homes are in high demand, which makes leasehold properties redundant.
Those who own a leasehold property, they have the right to extend their lease to add more value to their home and allow them to sell. There are a few potential options for this, ones which keep the leaseholder in the driving seat and the other the landlord, including:
Statutory Lease Extensions
The first lease extension option is the statutory lease extension. This is governed by the Leasehold Reform, Housing and Urban Development Act 1993 (Act), which is set around a framework wherein the lease extension is negotiated and granted.
There are various benefits and drawbacks of getting a statutory leasehold extension. Benefits include a guaranteed 90 years to add to the term of your lease, with ground rent reduced, and a limit to landlord powers of the lease. However, you may not qualify for the extension, and if you do there are lots of deadlines and various extension costs involved.
Voluntary Lease Extensions
Alternatively, you can go for a voluntary lease extension, which is where the leaseholder asks the landlord if they can grant an extension without having to comply with the statutory requirements mentioned above.
Within these sorts of negotiations, you can ask your landlord for any number of additional years, negotiating ground rent on top of this. What’s more, legal costs for this will likely be cheaper and can proceed more quickly.
There are various drawbacks to this too, however, including the lack of legislation and timeframes, which means nothing is guaranteed. Your landlord is also able to withdraw from the process at any time, and the leaseholder will have to make up for these costs. In addition, your landlord may choose to increase your ground rent, and any discussions will usually be on a take it or leave it basis.
2. Enfranchise the Lease
Leasehold enfranchisement occurs when you purchase a share of the freehold of the property as a collective with your neighbours. Buying the freehold of the building enables tenants to continue the occupation of their property on fair terms.
The right to enfranchise applies to any residential property with a long lease, low rent, and an original term of over 21 years. The property qualifies if the building can be considered a house or flats for residential purposes.
3. Renovate
If leasehold extension or enfranchisement seems like more trouble than it’s worth, there is also the option of renovation. According to Property Price Advice, there are various potential ways you can add value to your leasehold property through renovation.
For example, it’s said that getting a new bathroom could add up to between three and five percent value to your property. The same sort of added value can be applied to making the living and kitchen area open plan. Another potential project, which could see a 10 percent increase on your property, is increasing garden and kerb appeal.
There are various other ways you could renovate your property to add value. The key issue is cost; a renovation project can be hefty, and if you’re saving up to buy a house elsewhere, it may be tricky to handle it all.
Of course, you could always consider taking on a DIY project, but this can be stressful and certainly isn’t for everyone. It’s worth weighing up these costs over legal costs, and potential sale prices before and after renovation, before making a decision.
Ready to Take Control of Your Leasehold Value?
In this article, we’ve taken you through some of the ways you can add value to your short-term leasehold property. From extending the lease to renovation, there are a few options for you, so it’s important to assess these before making a decision.
Once you’ve had a think, it’s important that you seek the right advice from a financial professional or a solicitor. They can help you with making a decision on what route to take and can provide advice and legal aid throughout the whole process.
Have you ever been through the process of adding value to your leasehold property? Be sure to leave your experiences and nuggets of wisdom in the comments down 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 financial or property professional. Be sure to consult a financial professional or solicitor if you’re advised regarding your lease. We are not liable for risks or issues associated with using or acting upon the information on this site.