Sussex Lease Extensions Blog

Selling whilst in the process of obtaining a statutory lease extension

Did you know if you are selling a flat with a short lease you can do so whilst the statutory lease extension is still uncompleted?

The 1993 Leasehold Reform Housing & Urban Development Act requires leaseholders to have owned the property for two years before being able to claim a statutory lease extension. However, there is provision within the Act for the benefit of an extension notice to be assigned to a purchaser, meaning that they, in effect, avoid the 2 year ownership requirement.

In practice, this can work in one of two ways:

Firstly, property sold with the short lease but with the benefit of a valid S42 Notice (the notice which is served on a freeholder to claim a Statutory Lease Extension) assigned to the buyer. In this case the buyer would only pay a short lease value for the flat, but has the certainty of being able to complete a full statutory lease extension within a few months.

The extension will be on statutory terms with 90 years added onto the existing unexpired lease term and the ground rent being a peppercorn (zero) for the duration of the lease. In this instance, the vendor will have to accept that the price they are to receive reflects probably the worst case scenario of the lease extension costs but may allow an otherwise difficult to sell flat be sold.

Secondly, the vendor can start the process as above but in this case to still be responsible for the cost. The buyer in this case pays the vendor as if the lease extension is complete and then a sum of money to cover the cost of the lease extension and fees is held by the seller’s solicitor pending completion of the lease extension sometimes several months after the sale completed. Once matters are agreed, the seller’s solicitor pays for the lease extension and fees out of the money retained and the balance is returned to the vendor. This means the vendor achieves a correct sale price for the property and the buyer has the certainty of purchasing a flat with a long lease at an agreed price.

These methods of buying and selling short lease flats are becoming increasingly popular. But there are some pitfalls if not treated properly. If you are considering buying or selling a flat with a short lease, you should always seek expert valuation and legal advice, on how to proceed. If you would like more information speak to the experts at Sussex Lease Extensions now by calling us on 01903 872211.

This entry was posted on Thursday, December 12th, 2013 at 11:44 am and is filed under Fresh News, Statutory Lease Extensions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.