Freehold flat, is it a wise buy???

kaybow

Hi, Im new to this forum so here goes...

I have seen a freehold flat that I would like to buy. The flat below is leasehold. I have read many comments with conflicting information. What is the best way forward regarding the leasehold and freehold with respect of new contacts to benefit both parties equally and keeping both parties safe from future complications. Also, some advice regarding mortgage companies who will lend on these types of property would also be appreciated.

hope someone can help

thanks

BitterAndTwisted

Owning a freehold can be a valuable asset and also puts you in a much better position than lots of leaseholders. Why do you think new contracts would be advantageous and what particular contract do you have in mind?

Cazza

"Proper" freehold flats can be a nightmare. They generally happn when a house has been converted into 2 or more flats but no lease was ever set up, with the result that all the flats in the building are freehold. As long as there is consensus from all the flat owners about repairs etc it can be fine, where there is disagreement is where problems can arise. If you own the top floor flat anda new roof is needed, whilst the peroson on the ground floor isn't interested in paying their share?! With no lease, there's no obligation for them to pay.

I think your flat may be diffrent however, as the ground floor flat is Leasehold. There is a significant difference between the situation I have described above, and a flat which is leasehold, but the freehold for the entire building is also being sold. You need to find details of EXACTLY what the situation is and then talk to a local solicitor about the implications. Do not go to a large national firm. Freehold flats only occur in certain pockets around the country and when I was working as a mortgage adviser I had an argument with a London solicitor who wouldn't believe there was any such thing as a freehold flat. It may be possible for the solicitor to set up a lease for the flat and for you to own the freehold as part of the conveyancing process. You will need to investigate this though and take thier advice regarding the practicalities and the expense.

Lenders wise, you're very limited. Natwest used to lend with a 10% deposit; otherwise you're going to need to look at the small regional building societies (they tend to cater for the types of properties which occur with say a 50 mile radius of head office). If it is a proper Freehold flat, it is likely to be cheap, this is because they are difficult to mortgage and the problems associated with not having a lease. The problems assoiated with not having a lease are why mortgage companies don't like them, it's too much hassle for them to sort out if they repossess you. Be very careful, resaleability can be difficult.

Doozergirl

I don't think it's what you are describing Cazza. A lot of houses have been converted where the original owner of the building converts part of it and leases it off whilst keeping the freehold and the rest of the house with the same title. The lease covers the responsibilties of both leaseholder and freeholder and these types of freehold flat are much more acceptable to lenders than a true freehold flat. The benefit to you is that perhaps one day you will benefit from a lease extension.

Ultimately there should be a HIP on this property and it would be worth reading it through yourself if you can decipher it and also asking your solicitor to read through before you make a full commitment with mortgage applications etc.

Sooler

Consider whether this will be a problem when you come to sell it. Don't buy anything you can't sell.

Fire_Fox

Who owns the freehold on the house downstairs? What are the arrangements for maintaining the communal and external parts (especially the roof)?

Doozergirl

Sooler wrote: »

Consider whether this will be a problem when you come to sell it. Don't buy anything you can't sell.

You'll find that unless you are buying with cash an ignoring your solicitor then a mortgage company wil not let you buy something that cannot be sold and your that solicitor will make you aware of issues if there are any. If you have cash then you could potentially fix the situation (if there were a problem but I'm doubting it) and probably make a nice profit.

Sooler

ok ... don't buy anything that may be very difficult to sell

Richard_Webster

As others have suggested, you have to distinguish between a situation where there is a separate freehold title for just that flat (effectively unmortgageable except with a few lenders in the Scarborough area) and where the freehold title for the flat includes all the rest of the building as well.

The CML Lender's Handbook - http://www.cml.org.uk/cml/handbook/england contemplates the second situation in paragraph 5.5.3 and most lenders will accept it but you have to make it very clear to the lender that this what is happening and that they should look at 5.5.3, because brokers and many branch office staff will get it confused and think it is a "pure" freehold flat.