Creating a Leasehold from a Freehold property

super_ski

I current own a property - FREEHOLD FLAT, We also own the freehold to the downstairs flat - a lease agreement is in place.
We are thinking of creating a lease to our flat so it's easier to get a mortgage

Does anyone know of an easy way of doing this without being fleeced by a solicitor?

There is a mortgage in place, so I know i'll have to get consent from the lender. No other money is being exchanged.

thanks

pie81

is it really easier to get a mortgage for a leasehold flat than a share of freehold flat? this sounds surprising to me, I can't really see why the mortgage company would prefer leasehold.

super_ski

Mortgage companies prefer leasehold in this case as the freehold is for both my flat and the downstairs flat. potential hassle to recoup monies for shared maintenance etc.

pie81

so the mortgage company is worried that you might have to (say) shell out for a new roof but then have problems getting half back from the other flat?

but even if you do convert the flat to leasehold, you are still the freeholder as well, so you still would have to shell out for the new roof and then claim it off the other flat. technically you may be split into two entities - leaseholder and freeholder - but in practical terms you still have just the same income and liabilities as before. so it shouldn't really make a difference from the bank's pov?

sorry if I am being dumb here!!

super_ski

legally it's still a leasehold & therefore maintenance is upon the freeholder!
freeholder must be difference from leaseholder too - i'll assign this to my mum.

so back to the original question... Does anyone know of an easy way of doing this without being fleeced by a solicitor?

Richard_Webster

If you own the freehold of the whole building and there is a long lease (originally 99 years +) on the downstairs flat then most lenders will lend on the freehold of the whole building. If you tell them you have a freehold flat they won't understand and say it it can't be done. Your flat is not freehold on its own and the fact that you own the freehold of the whole building makes all the difference. You shouldn't need to create a lease.

The CML Handbook paragraph 5.5.3 covers the point (this is Abbey National's version but most major lenders are the same):

5.5.3 Unless we indicate to the contrary (see part 2), we have no objection to a security which comprises a building converted into not more than four flats where the borrower occupies one of those flats and the borrower or another flat owner also owns the freehold of the building and the other flats are subject to long leases.

5.5.3- Do you lend in these circumstances?
Yes.

{the part 2 is the question where Abbey say "Yes"}

A few lenders may be difficult - Bradford & Bingley/Mortgage Express were and HSBC are a law unto themselves as far as legal details are concerned but all the other "high street lenders" say the same thing - so just check on the CML Website - http://www.cml.org.uk/handbook/frontpage.aspx where you select "England & Wales" for select handbook and then find your lender and go to PARTS 1 & 2 and see what your chosen lender says for 5.5.3.

Then go to local branch of lender or broker and tell them that paragraph 5.5.3 of the CML handbook applies - lender's HQ will look it up and say that it is OK.