ChatterBank1 min ago
freehold and leasehold
2 Answers
We own the freehold title to a house which is arranged as 2 flats, which do not have separate leases. This means the house is not mortgageable in the present climate.
What's the easiest/cheapest way to get round this? I assume we'll need to draw up 2 leases, but we will then own both the freehold and the leases - ?
What's the easiest/cheapest way to get round this? I assume we'll need to draw up 2 leases, but we will then own both the freehold and the leases - ?
Answers
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Well the freehold of the property would be mortgageable.
If the flats do not have separate leases then you must presumably be letting them on short-term tenancies of typically 6 months?
Having a lease of say 99 or 125 years on the upper or on both of the flats would certainty satisfy the requirement of mortgage companies (of having an asset - either freehold or leasehold for them to secure the mortgage on). That would then enable you to sell the flat (or flats) separately - if that is what you want. Yes, you would own both the freehold of the site, and the leasehold of the flats for a short time as you effect the transaction - then you'd sell on each of the leases. It depends what your long-term objective is for your investment.
You could probably obtain a mortgage on the property as it is (split into flats on short-term tenancies) but the lender would need to be one that accepted 'buy-to'let mortgages - which is what you currently have?
Finally, (depending how you plan to operate) you could consider just splitting the top flat off as leasehold premises - retaining the lower one with the freehold. This may be advantageous if say you lived in the lower flat.
You really need professional advice.
If the flats do not have separate leases then you must presumably be letting them on short-term tenancies of typically 6 months?
Having a lease of say 99 or 125 years on the upper or on both of the flats would certainty satisfy the requirement of mortgage companies (of having an asset - either freehold or leasehold for them to secure the mortgage on). That would then enable you to sell the flat (or flats) separately - if that is what you want. Yes, you would own both the freehold of the site, and the leasehold of the flats for a short time as you effect the transaction - then you'd sell on each of the leases. It depends what your long-term objective is for your investment.
You could probably obtain a mortgage on the property as it is (split into flats on short-term tenancies) but the lender would need to be one that accepted 'buy-to'let mortgages - which is what you currently have?
Finally, (depending how you plan to operate) you could consider just splitting the top flat off as leasehold premises - retaining the lower one with the freehold. This may be advantageous if say you lived in the lower flat.
You really need professional advice.
Thanks. The problem in the present climate is that the house is viewed as technically 'in multiple occupation' being 2 units without separate leases - of course it isn't, but any excuse will apparently do. I was hoping to avoid the expense of creating leases, and will continue looking for a BTL mortgage that will accept the present situation, as logically there's no real reason why they should not. However I may have to go down the leases route, in which case the freehold will be in my name, and the leases in mine and my wife's joint names - I think!
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