Freehold Duplex Flat Above Shop - a problem?

kittensoup

Hello there,

Any help here will be appreciated. We're going to view a lovely, huge Victorian flat tomorrow, which is incredibly cheap, and we're wondering why!

My dad thinks it is something to do with it being "freehold" - it's a duplex flat, above a shop. When I spoke with the lady at the estate agents, she mentioned that there's a contract between the shop below (on a lease) and the flat owners, that say the shop have to contribute towards the "upkeep" and "maintenance" of the property.

Does anyone know why this property would be going cheap, or has been on the market so long (at least a year if my memory serves me correctly)

Thank you!

Richard_Webster

If the flat owners own the freehold of the whole building but the shop owner has a lease of the shop then in theory that might be mortgageable.

The issues are more to do with the the fact that it is a flat above a shop and lenders are pretty wary of that scenario

sooz

Time on the market reflects the interest others have had in the property.

Shops are generally on main roads.

Types of shop & opening hours can change dramatically.

It might currently be a lovely cupcake shop. It could become a open all hours kebab shop. For example.

agrinnall

I've long been a bit puzzled by this, there must be hundreds of thousands of flats above shops throughout the country, and if it's hard to get a mortgage on them who actually buys them? Is it people with enough cash not to need a mortgage, is it easier to get a BTL mortgage than a residential one, or is the reluctance to lend a recent thing and there are lots of people who bought before the crash and are now stuck in these flats as nobody else can buy them?

Dave_Ham

When you view, ask the Estate Agent and I am pretty sure they would tell you. Assuming the EA does not show you around, ask them anyway

They will have no interest not to have their time wasted and will probably tell you what you need to know.

There are still lenders that will lend above commercial property, but you will need to know what licenses they have and may have a restricted loan to value imposed..

The more detail you can get and provide an appropriate person with, the more specific the solution would be...

sirmosh

agrinnall wrote: »

I've long been a bit puzzled by this, there must be hundreds of thousands of flats above shops throughout the country, and if it's hard to get a mortgage on them who actually buys them? Is it people with enough cash not to need a mortgage, is it easier to get a BTL mortgage than a residential one, or is the reluctance to lend a recent thing and there are lots of people who bought before the crash and are now stuck in these flats as nobody else can buy them?

The problem is down to the property being freehold rather than leasehold. Most flats are leasehold and providing the lease is long enough it's not difficult to get a mortgage on one, buying a so-called 'floating freehold' can be difficult if you need a mortgage.

agrinnall

sirmosh wrote: »

The problem is down to the property being freehold rather than leasehold. Most flats are leasehold and providing the lease is long enough it's not difficult to get a mortgage on one, buying a so-called 'floating freehold' can be difficult if you need a mortgage.

Thanks for the info, I have little expertise on the tricky bits of English property law so that wasn't something I knew much about. Which then begs the question of why it isn't an issue for mortgage providers that nearly all flats in Scotland are freehold.

Richard_Webster

The problem is down to the property being freehold rather than leasehold. Most flats are leasehold and providing the lease is long enough it's not difficult to get a mortgage on one, buying a so-called 'floating freehold' can be difficult if you need a mortgage.

But it isn't a floating or flying freehold because they own freehold of whole building.

OK it is still difficult, but some of the difficulty is more about the fact that lenders don't understand what is happening and think that the flat itself is freehold.

propertyman

kittensoup wrote: »

Any help here will be appreciated. We're going to view a lovely, huge Victorian flat tomorrow, which is incredibly cheap, and we're wondering why!

Richard has covered it very well, but here is a solution.

If you agree to purchase it, you would arrange at completion to transfer the freehold into say Kitten soup Ltd, and grant a lease of the flat to Kitten soup, the person.

The mortgagee would loan on the flat on the basis of a draft lease to be granted on completion, all of which a lawyer can resolve for you.

However....

As freeholder you will have obligations over the building and perhaps the shop as well.

If the flat works for you the first thing you do is put down the Ikea catalog and get a local solicitor ( one that does commercial and residential leases - not the EA's friendly service) and a copy of the lease for the shop and work out what your obligations are.

if they are on a long lease, at a ground rent, and repair all their own property and pay a full share of looking after the exterior and structure, then you might even offer a chance for them to take 50% of the shares of Kittensoup Limited.

If they have a 10 year lease with 5 yearly reviews and internal repairing only- do you want to be a commercial landlord?

Hope that helps