Small print detail all homebuyers NEED to check – or risk having to pay £6,600 fee later --[Reported by Umva mag]

THOUSANDS of homeowners are at risk of having to fork out £6,600 on average before they can sell their house – and the number of people affected is growing, property experts have warned.

The length of a lease remaining on a leasehold property is a crucial element to look out for when it comes to buying a home.

This is because most lenders require a certain number of years left on the lease before they will lend on a property.

If you do buy a home with a short lease, you could find you struggle to sell it later and may have to fork out thousands to extend the lease first.

In the past, a short lease has been considered to be anything under 80 years.

But The Sun has spoken with a number of property experts and estate agents who say this number has been gradually creeping upwards.

Now, properties with leases of less than 120 years are looking unattractive to buyers, they say, meaning thousands of homeowners may unexpectedly find their home difficult to sell in the near future.

There are around 370,000 homes with leases of under 80 years, according to HomeOwners Alliance, meaning hundreds of thousands of properties could be affected.

What is a “leasehold” house and a “lease length”?

A “leasehold” tenure means you buy the right to live in a home for a set period of time, but you don’t own the land it’s on.

This tenure tends to be more common with flats, although some new-build housing developments are leasehold too.

Leasehold homes have a number of years left on their “lease”. For new flats, this typically starts at 999 years.

In theory, if the lease on a leasehold property expires, the property is automatically transferred back to the “freeholder” who owns the land.

This rarely happens in reality, but this is because leasehold owners end up paying to extend the lease term on their home, which can be very costly.

The fear of being stuck with a property with a lease that could expire or cost a fortune to extend is putting off buyers, and in turn this is making lenders wary of those homes as they are perceived to lose value over time.

Typically, the cost of extending a lease can range between £3,600 and £6,598, according to SAM conveyancing.

If the remaining lease is short, it will make it harder to find a lender happy to lend without it being extended.

We’re seeing more buyers hesitant to take on a property where a lease extension may be required soon after purchase, especially with the costs and complexities involved Andrew BoastSAM Conveyancing

Changing attitudes towards lease lengths

In the past, a “short lease” was considered less than 80 years. But experts say greater awareness of leasehold issues is causing attitudes to change, with buyers looking for even longer leases.

Andrew Boast, property expert at SAM Conveyancing, explained: “The recent shift in attitudes towards leasehold lengths, with leases below 120 years now seen as less attractive, is likely due to a combination of factors.

“This includes longer-term mortgages, buyer caution around the cost, risk and complexity of extending a lease, and growing pressure for leasehold reform.”

He added: “Overall, we’re seeing more buyers hesitant to take on a property where a lease extension may be required soon after purchase, especially with the costs and complexities involved.

“The fear is not just about the immediate expense associated with an extension but also about marketability down the line – especially in light of how much the property market has fluctuated in recent years.

“If the lease is seen as a liability, selling it later could be more challenging, leading to a situation where a minimum 120-year leasehold is becoming the new norm.”

Sarah Gillbe, senior consultant legal executive at Setfords, added that a lease has become a depreciating asset like a car, with homes with shorter leases losing value more quickly.

“For every year off the term of the lease, the extension will be more expensive as the landlord’s interest is greater and the leaseholder’s has diminished,” she explained.

“Because of the speed of reduction in value on a shorter lease, lenders are usually only confident on lending on leases with plenty of time left so that the asset remains valuable to them.”

Mortgage lenders and leaseholds

Most mortgage lenders still currently require 85 years remaining as a minimum on a lease before considering a mortgage offer.

But Peter Gettins, a product manager at L&C Mortgages, said it’s credible to that lenders will begin to increase this.

“The remaining lease is certainly a factor for lenders and policy can vary widely, but many will require a remaining lease of around 80-85 years when taking the mortgage out, and to have 45-50 years remaining at the end of the mortgage term,” he said.

Nationwide, Virgin Money and Leeds Building Society both require an unexpired lease of at least 85 years.

Barclays, TSB, Halifax and Lloyds all insist on a leasehold term of 70 years remaining before they will considering lending.

However, there are still some lenders willing to offer a mortgage on homes with very short leases. NatWest and Santander require just 30 years, for example.

People who own freehold properties don’t come up against these problems.

This is because buying home with a “freehold” tenure means you own the building and the land it occupies, making them more attractive to mortgage lenders.

How do I check if a property is leasehold or freehold?

When you buy a property, you should be advised about its tenure – whether it is leasehold or freehold.

Make sure that you ask the estate agent when you view the home as they should know or be able to find out.

However, if you’ve already bought a property and aren’t sure if it’s leasehold, it should say in the legal documents you got when you bought it.

If you can’t find these, you can look your property up on the Land Registry, where all homes are recorded

You can look yours up on the government website.

How to extend a lease on a home

You can ask the landlord, also known as the freeholder, who owns the land your home is on to extend your lease at any time.

This is typically by 90 years for a flat or 50 years for a house, according to the government website.

This will cost you money, so make sure you can afford it before requesting an extension.

The Leasehold Advisory Service has a calculator you can use to estimate how much it will cost you here: https://www.lease-advice.org/calculator/.

Are new rules coming in to protect leasehold homeowners?

The Leasehold and Freehold Reform Act received royal assent in May and should come into law in the next few years.

The law is intended to make it easier and cheaper for leaseholders to extend their lease or buy their freehold.

Mr Gettins from L&C Mortgages said: “Once it’s fully implemented, and assuming it works as planned, leaseholders should face fewer challenges.

“But until then the remaining term and/or cost of extending a lease will remain important considerations for potential buyers.”

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