Leasehold Property

[pinkjudy45]

My husband and I own a house that has been converted into two flats in the 1970s, we now want to get a mortgage on these properties and have been told by a solicitor that we must have lease on these properties and that my husbands son will be the freeholder, are there any disadvantages to this arrangement.

[ToraToraTora]

what Rubbish you own the freehold now, no need for a lease at all.

[AuntPG]

No its not rubbish.

Where a building is divided into multiple homes there will inevitably be issues concerning maintenance, access, parking etc that affect all of the properties. Making all of the properties leasehold is the usual route to ensuring that these issues are managed and paid for on an equitable basis through management fees and service charges.

In England, very few lenders will offer mortgages on freehold apartments. This is due to concerns about poor maintenance or unauthorised alterations in one property affecting other apartments in the same building.

If they want to sell the Flats separately then they will have to create two Leaseholds with a member of the family as the Freeholder. The Freeholder cannot be the same person or persons as the Leaseholders.
I can't see what disadvantages there would be, its normal practice when dividing properties into flats.

[pinkjudy45]

Thank you AuntPG

[ToraToraTora]

yes but it depends on the intended configuration. If you own the house you own the freehold. Why would you assign that elsewhere? What do you intend to do with the flats? That's the key thing.

[davebro]

//The Freeholder cannot be the same person or persons as the Leaseholders.//

If it's 2 (or more) flats the owner of one of the flats can be the leaseholder for the building. Local authority here sometimes sells a single flat in a block to include the freehold for the whole block.

[davebro]

Some "owner occupied" houses were (and still are) leasehold & there are now many complaints about leasehold terms on new build houses.
Back in the day our little terraced house was leasehold on a 999 year lease with a ground rent of £10 pa.
Leases can stipulate if the building is to be maintained by the freeholder or the leaseholder.

[AuntPG]

If you wish to divide your property you must create brand new leases for each flat, with Land Registry compliant drawings in place

Regarding leases, Landlord and Tenant common law stipulates that the landlord and Lessee must be separate entities. This is often seen when, for example, the owner of property may want to retain his freehold and leasehold titles in his same name, but this will not be possible and seen as void by the land registry. A solution is often to keep the freehold title in his personal name and grant a lease into the name of a limited company (wholly owned by the freeholder to retain control) or vice versa.

[ToraToraTora]

APG, "If you wish to divide your property you must create brand new leases for each flat, with Land Registry compliant drawings in place " - only if they are divided to be sold separately. The OP is unclear about what the intentions are.

[ToraToraTora]

also if they are to be sold the separation work must be done to a lot more regs or no lender will touch it.

[AuntPG]

The OP wishes to raise a Mortgage on the flats. Mortgage lenders will not normally loan against Freehold flats due to numerous reasons. Their solicitor has suggested changing the Flats to Leasehold, giving a member of the family the Freehold rights ,then I presume the husband and /or wife will apply for a Mortgage on the now Leasehold Flats. The Land Registry does not allow the same person to own both the Freehold and the Leasehold on a property, though members of the same family can.