Leaseholders faced with the declining value of their shortening leases can now use a new service from estate agents Stanley Chelsea and Market Harborough Building Society, called Short Lease Solutions (SLS).
The mortgage-free leaseholder sells the lease back to their freeholder at the market rate for their remaining lease length and receives a five-year non-assignable low rent tenancy – renewable for a second five-year period if required.
The freeholder’s purchase is wholly funded by Market Harborough BS. The leaseholder receives 50% of the purchase price on completion and 50% balance when leaving the property. Additionally, the leaseholder/tenant’s rent is fixed low to cover the freeholder’s monthly interest charge, which is covered by the released cash.
According to SLS, the main advantage to the leaseholder is that the sale price is fixed and avoids further decline as the lease shortens. At the same time the leaseholder remains in the property to become a low-rent-paying tenant with time to plan when they will leave. They are also no longer responsible for the service charges.
The freeholder benefits from an earlier acquisition of the property with minimal payment.
Older leaseholders with fewer years remaining on their lease find it almost impossible to raise money to meet service charges without selling and moving out. Most are keen to stay in their homes until they are ready to move.
Buying a lease extension through equity release can be complicated and fairly pointless if the intention is to move out in the next few years.
Because of these reasons, SLS says it wants to provide an economic solution for both leaseholder and freeholder.