Key points –

1. The leasehold reform bill in the UK aims to make extending leases or buying freeholds easier and more affordable, especially by removing the ‘marriage value’.
2. Property owners with short leases face challenges in selling or remortgaging, and the bill could increase their property’s value if it becomes law.
3. If financially feasible, extending a lease before selling could attract more buyers and potentially increase the property’s value.
4. Valuing a property with a short lease is difficult, so consulting a lease valuation surveyor is advisable for a more accurate estimate.
5. The reform bill will benefit leaseholders by reducing costs and complexity of lease extensions, but could negatively impact freeholders and other stakeholders like local authorities and pension funds.

The UK property market could be on the brink of a significant transformation with the proposed leasehold reform bill, which aims to make it easier and cheaper for leaseholders to extend their leases or buy freeholds. But what does this mean for you if you’re looking to sell your leasehold home? Let’s break it down into simple terms.

Understanding Leasehold and Freehold

Firstly, let’s clarify what we mean by leasehold and freehold. In the UK, if you buy a property freehold, you own both the property and the land it’s on indefinitely. This is the most common way of buying a house. Leasehold, on the other hand, means you only own the property for a set period (usually between 99 and 999 years) but not the land it’s on.

The Current State of Leaseholds

For leaseholders, especially those with leases under 70 years, selling or remortgaging can be challenging. Plus, they have to pay ground rent and service charges. With close to 5 million leasehold homes in England and Wales, this is a big issue.

What’s Changing with the Reform Bill?

The leasehold reform bill, introduced to Parliament on 27 November, is set to overhaul this system. It aims to make extending leases or buying freeholds cheaper and easier, by removing ‘marriage value’ and setting ground rent to zero after lease extension. The standard lease extension would increase to 990 years. However, this bill is still in the works and could change before becoming law.

Should You Wait to Sell?

This brings us to the big question: should you wait for this bill to become law before selling your leasehold property? When a reader asked this question in the Daily Mail, experts like Linz Darlington and Paula Higgins suggested that waiting could be financially advantageous, as the reform might make your property more valuable. But remember, there’s no guarantee the bill will pass soon, and your lease will continue to shorten in the meantime.

Checking the Estate Agent’s Valuation

It’s tricky to value a property with a short lease, as there are few comparables. You could consult a lease valuation surveyor for a more accurate estimate. Remember, the value of a short-lease property is what someone is willing to pay, considering the cost and hassle of extending the lease.

Extending the Lease Before Selling

If you have the funds, extending the lease before selling is usually better. It makes the property more attractive to a wider range of buyers, including those needing a mortgage. However, if you can’t afford it, selling as is might be your only option.

Winners and Losers of the Reform

The proposed reform will benefit leaseholders by making it cheaper to extend leases and potentially increasing the value of short-lease properties. However, freeholders and entities like local authorities and pension funds might lose income streams from ground rents.

Conclusion

While the leasehold reform bill promises significant changes, it’s still a waiting game. If you can afford to wait and take the risk, it could pay off. However, it’s essential to weigh this against your personal circumstances and plans. Keep an eye on the progress of this bill, as it could shape the future of the UK property market.