How do you sell a leasehold property? What to consider

What is a leasehold property?

Let’s start with the basics. A leasehold property is a property you own the right to live in for a set period, rather than owning the property or land it sits on outright. Think of it as a long-term rental agreement, except instead of renting, you have a lease from a freeholder.

As a leaseholder selling the property, you’re essentially passing on your rights under that lease to a new buyer.

Lease terms can vary but are typically quite long – often 99, 125, or even 999 years when first granted. The remaining time left on the lease is an important factor for buyers, as the lease term gets shorter, the property becomes less valuable.

The freeholder, while owning the land, has little control over your leasehold day-to-day. But they’ll likely charge annual ground rent and service charges that cover maintaining the building and any communal areas.

We have a guide on the difference between a leasehold and a freehold here.

What’s the process for selling a leasehold?

Selling a leasehold property does involve a few extra steps compared to a freehold sale, but don’t worry – we’ve got you covered. Here’s a quick overview of the process of selling a leasehold:

1. First up, you’ll need to get approval from the freeholder or their management agent that they consent to the sale of the lease transfer. There may be some admin fees to pay here for the freeholder to complete the LPE1 form.
2. Before you market the property, you’ll need to gather all the relevant leasehold documents like the lease agreement itself, recent ground rent statements, and service charge accounts.
3. If the remaining lease term is getting quite short (especially if less than 80 years), you may want to consider extending the lease before selling, as this can impact the property’s value and saleability (see our FAQs to learn more).
4. Choose an experienced conveyancer who is familiar with leasehold transactions to handle the legal aspect of the sale on your behalf.
5. Market your property and get an offer, once your property is under offer, the sale process can formally begin.
6. Once you find a buyer, you’ll need to respond to any queries and provide them with a leasehold management pack alongside the usual seller’s forms. This is what the freeholder will charge for.
7. It’s then time to exchange contracts, the property transaction will become legally binding at this point.
8. Finally, you’ll reach completion day, when the sale is finalised, the keys are released to the buyer and they become the new legal owner.

If you want a more comprehensive overview, you can check out our complete guide on how to sell your property here.

Is it harder to sell a leasehold property?

Many property owners wonder, “is selling a leasehold harder than selling a freehold?” Although selling a leasehold isn’t necessarily harder, it does present some unique challenges.

Like any property sale, some things could make it more difficult, but this depends on each unique sale. Here’s what you need to consider:

1. Time and complexity:

• The process is often more long-winded
• It usually takes more time due to freeholder involvement
• Additional paperwork and documentation are required

2. Factors that can make selling a leasehold harder:

• The remaining lease term, shorter leases are less attractive
• Any disputes or issues with the freeholder
• Providing incorrect leasehold information to the buyers
• Clauses in the lease, such as pet ownership or reservations

3. Preparation is key:

• Gather all necessary documentation early
• Address any potential issues with the lease or freeholder
• Consider extending the lease if it's short

4. Expert assistance:

• Work with a real estate agent experienced in leasehold sales
• Consult with a solicitor who specializes in leasehold properties

While selling a leasehold property can be more complex, being well-prepared and understanding the process can make it smoother. With the right approach and professional help, selling a leasehold doesn't have to be significantly harder than selling a freehold property.

Leasehold management pack: This is also known as the TA7 form. The leasehold management pack summarises the lease, including:

• How much ground rent you pay
• Service charges and administration fees
• Any plans your freeholder has for major works/renovations
• Details of the building insurance policy
• Information on the management company
• Asbestos surveys (if any)
• External wall fire reviews

Alongside this, you’ll need all the usual paperwork that needs to be provided when selling a property. This includes:

• Proof of identity
• Property title deeds
• Energy performance certificate
• Property information form (TA6)
• Fittings and contents form (TA10)
• Warranties and guarantees

Find out more about all these documents in our guide to what paperwork you need to sell your property.

Can you rent out a leasehold?

If you’re considering renting out your leasehold instead of selling, whether you can depends on your leasehold agreement. More often than not your leasehold agreement will outline one of the three following:

• You can’t sublet at all, under any circumstances.
• You can sublet if you get permission from the freeholder.
• You can sublet without the need for freeholder consent.

If there is no mention of subletting in your agreement, then the appropriate step would be to contact a legal professional to have a look at your agreements and advise on the next steps.

Some leases may include additional restrictions, such as you can’t sublet a property:

• In part, this means you can’t for example rent out your property and not your garage.
• As a holiday or short-term let
• For business purposes

If you don’t adhere to the conditions laid out in your agreement, your freeholder would be within their rights to take legal action.

It’s important to note that as the leaseholder, you would ultimately remain responsible for paying the ground rent and service charges, even when the property is rented out to tenants.

Frequently asked questions

How long does it take to sell a leasehold property?

It typically takes slightly longer to sell a leasehold property when compared to selling a freehold thanks to the extra paperwork and checks that need to be done.

It’s impossible to know how long your home will be listed on the market before getting an offer. That depends on factors like demand from buyers in your local area, how well your property shows, the asking price, and so on.

But once you do accept an offer, the conveyancing process generally takes around 10 – 12 weeks on average. It’s a little longer than a freehold sale, sure, but it’s not a huge delay.

How do I extend the lease on my property?

As a leaseholder, you have rights when it comes to extending your lease. It’s called Statutory Lease Extension and gives you a formal process to follow. You can extend you lease outside of the legislation if both parties agree.

Here are the key steps to extending your lease:

1. You’ll want to hire a specialist surveyor to calculate the value of the lease extension
2. You’ll then need to serve your freeholder a Section 42 Notice. This is a formal document that outlines your offer to extend the lease.
3. They’ll have two months to respond – either accepting, rejecting, or negotiating your proposal.
4. If they counter-offer and you don’t accept, you might enter a period of back-and-forth negotiations, which could last weeks or even months. Every case is unique.
5. Once you finalise and agree on that premium cost, you’ll hand things to a solicitor to hand the legal lease extension paperwork. Then you’ll pay the premium fee.
6. And finally, the lease gets officially extended for the agreed term.

What happens at the end of a lease?

Earlier we talked about why it’s so important not to let the leasehold term dwindle too low before taking action. And there’s a really good reason.

If your leasehold fully expires (reaches 0 years) and you haven’t extended or renewed it beforehand, the entire property and land (if relevant) revert to a freehold, and ownership goes back to the freeholder.

Even if you paid off your mortgage years ago and have no outstanding loans in place, letting that lease fully run out means you no longer have any legal claim to continue living there or retaining ownership.

It’s a worst-case scenario that you really want to avoid by staying on top of the lease term and renewing or extending it through the proper channels before it ever gets down to those critical final years or months.

Can I sell a leasehold with a short lease?

Yes, you can sell a leasehold property with a short lease, but it may be challenging. Properties with leases under 80 years are often less desirable to buyers and may be difficult to mortgage. Consider extending the lease before selling or being prepared to negotiate on price.

What happens if my freeholder is unresponsive during the sale process?

If your freeholder is unresponsive, it can delay the sale. In this case, you may need to seek legal advice. If your freeholder does not respond, you may be able to act through tribunal. They are under no obligation to respond, which can make sales near impossible if you run into this issue.