At The Property Lifeline we speak with hundreds of people in the process of selling a flat as they do not seem to be able to sell them on the open market at all. Not all of these people have financial trouble, aren’t facing repossession and for many this can be a very frustrating time as it can be very confusing as to why they aren’t able to sell them quickly.
There are a number of factors that have a negative impact on flats and apartments including ground rent, service charges, leases and whether they are purpose built or conversions. However the biggest challenge at the moment is without doubt the lack of mortgage lenders that are prepared to lend on flats and apartments.
Leasehold Properties and Service charges
When purchasing a leasehold property you are only purchasing the lease not the freehold of the property and therefore the freeholder will usually charge you a ground rent and service charge to maintain and care for the communal and external areas. Since the recession began in 2008 many flat owners have found the cost of ground rent renewals rising and service charges rocketing, each having a negative impact on the resale value of the apartment.
The length of the lease also has a massive effect on the value of your property. Any property with a lease under 80 years drastically reduces the amount of mortgage lenders available to new buyers or for remortgaging. Anything below 60 years is completely un-mortgagaable. Couple this problem with something known as the marriage value and you can have a flat that is almost worthless.
What is the marriage value? This is where an increase in the value of the property, brought about by an increase in the length of the lease must be shared with the freeholder (also known as the landlord). So you are in effect paying out to the freeholder twice.
Mortgage lenders have also begun refusing to lend against any properties that aren’t a standard construction, these include high rise properties built from poured concrete or timber framed properties. Other problems include the height of a building and how many floors it has and how many other flats in the block the mortgage lender has already lent against.
Own a flat above a restaurant or take away and you have virtually no chance of selling or refinancing that property, at all. Currently there is only one mortgage lender that will lend on properties above a take away and they will only grant a mortgage based on the surveyors comments. Many mortgage providers are refusing to lend on properties that are located within close proximity to, or even opposite a take away.
We recently helped a gentleman to sell a property located two storeys above an Indian takeaway, his property was immaculately refurbished to a very high standard with two double bedrooms, two bathrooms and under floor heating throughout. Other properties in the area were selling for over £250,000 but this property was offered to auction at just £125,000 and it still did not sell.
This highlights what a hugely negative impact the lending restrictions have on properties like this. Anybody buying a leasehold property or flat should be made aware that they need to thoroughly check all aspects of the lease and the ground rent and service charge plus any proposed major works that are forecast before committing to the purchase. Similarly, anybody that wishes to sell a leasehold property really must do as much homework as possible before offering the property to the market as a cash buyer really may be the only option.
If you facing repossession, in financial difficulty or just have property problem The Property life line can make you guaranteed cash offer for your property.
please feel free to contact thepropertylifeline.co.uk or call us on 0800 511 8685.