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Leasehold properties: your quick guide

You may have seen the recent headline that was too good to be true - flat for sale in Knightsbridge priced at just £120,000. The catch? The lease attached to the property was to expire in the following ten weeks. The article raised an important issue for buyers of properties for sale in central London - especially flats. When comparing property prices and analysing search results, it's crucial to check if the property is being offered as leasehold and if so, how much of the lease is left to run. The shorter the lease, the cheaper the property but looks are deceiving. Making a purchase of this kind can prove very costly if you want to stay in the property after the lease has expired. In the case of the £120,000 Knightsbridge flat, a new lease is estimated to have cost around £1.2 million. Here's Winkworth's quick guide to leasehold properties for sale in central London:- What is leasehold? A leasehold means you don't own the land on which the property is built and you only own the actual property for the length of the leasehold - say 99 years. The person that owns the land is the freeholder and he effectively rents the property to you for a set period of time. Many flats for sale in central London are sold on a freehold basis. What happens when the lease runs out? The freeholder can take back ownership of the property and you are required to leave, or the freeholder can grant permission for a new lease to be issued. Why are properties with short leases so cheap? It boils down to one of two things:  either the freeholder intends to take the property back at the end of the lease, ending the leaseholder's occupation, or the freeholder is prepared to issue a new lease but at a cost appropriate to the property's value. A new lease can run into hundreds of thousands of pounds and can easily dwarf the purchase price of the property, especially in Central London. Can I extend my lease while living in a leasehold property? If you have leased the property for at least two years, you may qualify for Statutory Lease Extension, where you can acquire a new 90 year lease extension on top of the remaining lease term. Extending your lease will add to the value of the property should you wish to sell. When is the best time to extend a lease? It is advantageous to ask for a lease extension while there are at least 80 years left to run of the current lease. If the remaining lease is less than 80 years, 'marriage value' applies. Marriage value is the price difference between the property with its existing lease and the value of the property with a short lease. If the lease is less than 80 years, the marriage value has to be shared equally between the leaseholder and the freeholder. Can I try and buy the freehold? Freeholds can sometimes be bought, more likely if the freehold pertains to a house. Any freehold purchase would be negotiated with the freeholder via a solicitor and other property professional. Your request to buy the freehold may be refused, however.

You may have seen the recent headline that was too good to be true - flat for sale in Knightsbridge priced at just £120,000. The catch? The lease attached to the property was to expire in the following ten weeks. The article raised an important issue for buyers of properties for sale in central London - especially flats. When comparing property prices and analysing search results, it's crucial to check if the property is being offered as leasehold and if so, how much of the lease is left to run. The shorter the lease, the cheaper the property but looks are deceiving. Making a purchase of this kind can prove very costly if you want to stay in the property after the lease has expired. In the case of the £120,000 Knightsbridge flat, a new lease is estimated to have cost around £1.2 million.

Here's Winkworth's quick guide to leasehold properties for sale in central London:-

What is leasehold?

A leasehold means you don't own the land on which the property is built and you only own the actual property for the length of the leasehold - say 99 years. The person that owns the land is the freeholder and he effectively rents the property to you for a set period of time. Many flats for sale in central London are sold on a freehold basis.

What happens when the lease runs out?

The freeholder can take back ownership of the property and you are required to leave, or the freeholder can grant permission for a new lease to be issued.

Why are properties with short leases so cheap?

It boils down to one of two things:  either the freeholder intends to take the property back at the end of the lease, ending the leaseholder's occupation, or the freeholder is prepared to issue a new lease but at a cost appropriate to the property's value. A new lease can run into hundreds of thousands of pounds and can easily dwarf the purchase price of the property, especially in Central London.

Can I extend my lease while living in a leasehold property?

If you have leased the property for at least two years, you may qualify for Statutory Lease Extension, where you can acquire a new 90 year lease extension on top of the remaining lease term. Extending your lease will add to the value of the property should you wish to sell.

When is the best time to extend a lease?

It is advantageous to ask for a lease extension while there are at least 80 years left to run of the current lease. If the remaining lease is less than 80 years, 'marriage value' applies. Marriage value is the price difference between the property with its existing lease and the value of the property with a short lease. If the lease is less than 80 years, the marriage value has to be shared equally between the leaseholder and the freeholder.

Can I try and buy the freehold?

Freeholds can sometimes be bought, more likely if the freehold pertains to a house. Any freehold purchase would be negotiated with the freeholder via a solicitor and other property professional. Your request to buy the freehold may be refused, however.

How long does a lease extension take?

It can take between four to 18 months for extension negotiations to be fully concluded, so Winkworth advises that lease extension negotiations should be opened with no less than 82 years left on the current lease.

If you would like more detailed information on leasehold properties, please contact one of Winkworth's central London estate agents offices today.

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