Owning freehold to the flat below.

fiji_dave

The property search continues.

I've seen a flat which I'm really quite interested in. It's the top floor of a converted house and the details say that the top floor owns the freehold to the whole building.

Now, please excuse what may be a very dumb question, but... is this a good thing or a bad thing? If i went for the flat I presume this means that I would also become responsible in some ways for the lower floor flat?

What sort of questions should I be asking, what sort of problems could this throw up? What sort of mark-up on the top floor flat would they expect for having the freehold? (Flat is on at 200k)

As always, any help is gratefully received.

Cheers,
Dave

Leon_W

Be very wary of freehold flats. If you're looking for a mortgage then there are very few choices in lender which causes problems when looking to sell.

Are you sure of your facts ?

Usually with these converted houses the top flat will own the freehold to the bottom flat and vice versa. A much more satisfactory arrangement.

fiji_dave

duplicate post - sorry

fiji_dave

According to the details the Upper flat owns the freehold for the building. I took that to mean it owns the freehold for the upper and lower floors.

Would this be better than if it was just the freehold for the upper floor?

Richard_Webster

This isn't the same as a freehold flat - but people get ever so confused about the issue.

The last post mentions a reciprocal scheme where there are two flats and each owns the other's freehold - this is sometimes called the Tyneside Flat scheme and is used by Laings for their maisonettes. It is acceptable to most mortgage lenders. but so is your case - the freehold of the whole building subject to a lease of the other flat.

Have a look at page 2 of the thread at http://www.landlordzone.co.uk/forums/showthread.php?t=4776&page=2 where I refer to the Council of Mortgage Lender's Handbook requirements about this. The CML Handbook is what solicitors have to go by as far as technical legal stuff is concerning when checking details for lenders. If your lender is happy with your scenario, then you quote this at your broker if he says they won't lend on freehold flats!

Depending on the length of the other flat lease at some point in the future you may be able to charge a lot of money for a lease extension. So the freehold in this situation may be worth a little more but if there are quite a few years to go before the lease needs extending I don't think the seller will be able to charge much more for it because of that - its probably just one of a number of factors like location, central heating double glazing, parking, etc that will make a difference to valuation.

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients.

aah

I think you can be the freeholder for the building but you would also need to create (or have) a lease for each individual flat. Thus you would be both the freehold and leaseholder for the upper flat and the tenant/s downstairs would leasehold their flat, paying you the ground rent. I think this also gives you the responsibility of setting up a maintenance company for both flats....

I have just bought a leasehold gr floor flat with a defective lease and in the fulness of time am thinking about offering for the freehold. Even if I own the freehold I believe I have to have leases for both flats... not just the one I don't occupy (or let)..

Richard_Webster

Fiji Dave - I've just seen your most recent post - it is a total and unmitigated disaster for someone to own the freehold of just the upper floor. I know people think that freehold sounds nice and better than leasehold, but believe me it isn't.

Apart from Scarborough, where for some reason they seem to be happy with it, and one or two building societies will lend on freehold flats in that area, having a freehold of just your flat is an unmortgageable situation. Read the CML handbook on the web as referred to in my last post!

The scenario where you own the freehold of the whole building means that you can as landlord enforce any obligations in the downstairs flat lease regarding repair and maintenance of that part of the building. You don't want it fall down under you, do you? If you only owned the freehold of the upper floor you couldn't do this - and that is why most flats are leasehold - it is to do with making sure the whole building is looked after.

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients.

fiji_dave

Richard, Ahh,

things are getting clearer, cheers!! I'll check out the web reference.

I had a quick google on 'freehold flats' and saw that most lenders won't lend on them, but it looks like this situation is one whereby the freehold covers the whole building. I'd then need to see about leases on the flats (there's only two - the upper floor (the one for sale) and the lower floor).

I guess I'd need to decide whether I wanted to become a landlord! To be honest it's not something I've given even a moments thought to in my search for a house.

Is it a simple process or am I opening up a whole other can of worms...?

cattie

This is a recommended resource for info & advice on anything to do with leasehold property & that would include the type of property you are thinking about buying as both flats will be leasehold in spite of you owing the freehold.

It's a government funded agency so you can be sure the advice is sound. https://www.lease-advice.org

One of the benefits of having the top floor flat & being the freeholder is that you own the roofspace should you want to do a loft conversion at any time.

Doozergirl

If you own the freehold, you need to collect ground rent from the downstairs flat. You can also introduce a service charge for the upkeep, though it has to be reasonable.

Your obligation as freeholder is to ensure the structure of the building but the cost of maintaining that is actually split between the flats. In reality I think you'd discuss any maintenance work together with your neighbour and split the bills as they arrive. It's almost the same as having share of freehold, but you have the extra responsibility of collecting monies and the potential profit of a future lease extension downstairs and a cheque for the ground rent each year.

I think it's a pretty good thing.

fiji_dave

Blimey that all looks very complicated. To be honest I'm not sure whether it makes buying the flat a better or worse option. I don't know what's left on the lease - obviously lots of questions would need to be asked of the agents.

Managing the lease on another property wasn't something I'd given a seconds thought to. It's a whole side of property ownership that hadn't entered the equation. Some serious thought is needed.