Selling CGT + Extending the lease

20122013

Excuse this basic question

Contrary to other estate agents who all said if lease is not extended noone will want to buy it, however, this agent had a different approach which is to list my leasehold property  as  if they buyer would want to me to start the lease extension process so they will pay for the lease extension (£8500+) and I will cover the legal fees for myself and freeholder (approx  £4000 incl legal fees + VAT + disbursements). If the buyer does not require the lease extended - I expect they will make a lower offer approx £10,000 which I would accept. 

In terms of CGT, does it make any difference if the property is sold for 10000- £15000 more or less? ie  difference in sold price with or without extending the lease) as it is over the 'Additional Rate    Over £125,140    45%'

eddddy

20122013 said:

Contrary to other estate agents who all said if lease is not extended noone will want to buy it, however, this agent had a different approach which is to list my leasehold property  as  if they buyer would want to me to start the lease extension process so they will pay for the lease extension (£8500+) and I will cover the legal fees for myself and freeholder (approx  £4000 incl legal fees + VAT + disbursements). If the buyer does not require the lease extended - I expect they will make a lower offer approx £10,000 which I would accept. 

Does your estate agent know that the law changed on 31st January 2025?

Now there is no reason for you to start the extension process. If the buyer wants a lease extension, they can start the process as soon as they've bought your property.


Before 31st January 2025 the buyer would have had to wait 2 years before they could start a lease extension - but since 31st January, they can start it immediatly.

See: https://www.lease-advice.org/news-item/leasehold-reform-abolition-of-the-two-year-rule/


So now you just reduce your asking price by £10k or £13k or whatever - and tell the buyer that they can extend the lease for about £8.5k plus fees if they want.

(Do you have a valuation report that suggests £8.5k?)

20122013

eddddy  Yes, it seems only this EA knows about the 'change', I think the problem will be with the solicitors who seem to advice the buyers not to proceed due to the lease is too low, and most EA wants the simpliest route.

I have just told the EA that it will be £13K and not £8K and he said that's not a big difference

Good suggestion, I was going to list as £10K less the asking price but the EA said that would make buyers think there something wrong with the property and listing at the higher price will attract more interest (appreciate your comment) I want it sold soonest, trying to think how to overcome the obstacle of buyers being told by their solicitors the lease is too low as some solicitors  in February 2025 were not aware of the change.

£8,5K is the Freeholder response via the informal route.

eddddy

20122013 said:

eddddy  Yes, it seems only this EA knows about the 'change', I think the problem will be with the solicitors who seem to advice the buyers not to proceed due to the lease is too low, and most EA wants the simpliest route.

Either the estate agent or you are very confused.

There is no logical reason to start the lease extension process before you sell - it's pointless, and makes things complicated...

... and you will still be selling the property with an 85 year lease. So the buyer's solicitor will still warn the buyer about an 85 year lease. It makes no difference.


The logical thing to do is either:

• Option 1) Offer an informal lease extension on completion (if the freeholder is cooperative).

• Option 2) Do nothing. Let the buyer start a statutory lease extension after completion, if they want to. 

Edit to add...

Maybe those are the 2 options that the estate agent is proposing, and you misunderstood.

20122013

eddddy

Yes, my mistake, the lease extension would not start until I have a buyer.

If a buyer want the lease extended then I will extend it and the buyer will pay for the extension only and I will pay for my and freehold legal fees and disbursements. is this the norm?

eddddy

20122013 said:

If a buyer want the lease extended then I will extend it and the buyer will pay for the extension only and I will pay for my and freehold legal fees and disbursements. is this the norm?

That sounds like a messy way of presenting it to a buyer.

Maybe it would be simpler to specify the 2 prices when the property is advertised:

• £250,000 with an 85 year lease
• £262,500 with a lease extended to xxx years on completion

(I don't know the price of your flat - so I guessed £250,000. And I don't know how long the lease extension is that you've been offered.)

20122013

eddddy said:

That sounds like a messy way of presenting it to a buyer.

It would be much simpler to specify the 2 prices when the property is advertised:

• £250,000 with an 85 year lease
• £262,500 with a lease extended to xxx years on completion

(I don't know the price of your flat - so I guessed £250,000. And I don't know how long the lease extension is that you've been offered.)

Appreciate this

I will see what this agent says, I anticipate they can only have one price listed on RM and on certain band (230K, 240K etc) so £262500 will not be found but will ask them to add it to the advert.

The lease is 84 years