Owning freehold to the flat below.

hungary97_2

the easiest way to get round this (and get a mortgage) is to set up a management co for the freehold. This is the case for my flat and the 4 others in our building we share the freehold in a company and i have a mortgage with HSBC on it

shoppingnoodles

Hello Dave.
I'm not a solicitor, but I do own a flat and the freehold of the building (and therefore the freehold of the other 2 flats), so perhaps I speak from a different perspective.

When I first viewed my place, I completely adored it, but was worried when I realised it came with the freehold. However, it doesn't seem to be such a big deal in my town as lots of buildings here are the same and having spoken to several local solicitors, they had all dealt with similar properties without any problems. It seems to be a bit of a myth that few mortgage lenders will deal with this kind of property. My original mortgage 2 years ago was with the Abbey and I have recently remortgaged with Skipton BS. London and Country organised it all for me without any fuss. I was told by L&C and my estate agent that in the council of mortgage lenders handbook, it calls a flat of this nature "freehold with the benefit of leasehold", going on to say that its fine to mortgage such properties. That phrase seemed to open most mortgage lenders door to me.

Regarding maintenance/buildings insurance, we organised a bank account and made one of the other flat owners my co signatory and we all pay £50 a month into it. If something needs doing to the building, I get 3 quotes, agree it with the other owners and get it done. It works fine for us and its nice to have control of the running of the building, instead of having a faceless management company spending our maintenance payments.

The only small hitch that we have had is finding buildings insurance. We used a broker called Higos, who insured us through Zurich Insurance, but I am going to do a bit more research this year to see who else will do the correct cover. Honestly though, I really haven't found any problems. Ultimately, the important thing is that you love the place you are going to buy. I still get the "wow" factor when I walk into my place and whilst I am sure lots of MSE'ers will have poor opinions of owning the freehold of the building, I am so glad that I bought this place. If you feel that the place is right for you, don't let it stop you.

Sorry its been a long post, but I hope it has helped you to make your mind up!
Good luck!

loopy25

hungary97 wrote:

the easiest way to get round this (and get a mortgage) is to set up a management co for the freehold. This is the case for my flat and the 4 others in our building we share the freehold in a company and i have a mortgage with HSBC on it

Could you tell me a bit more about this. I am trying to get a new mortgage on my flat but since I bought it I have also bought a share of the freehold and am having problems with getting a new mortgage.
Sorry for the silly questions but do I still have a lease? I really don't know anything about it as my partner at the time sorted it out.

Please help!
Thanks very much!:o

Doozergirl

Regarding problemswith mortgaging a freehold property, Richard Webster has already tried to explain, but I'll try too as it seems people aren't really understanding!

It's the lease which is incredibly important here. If you have a lease, you should not have a problem obtaining a mortgage. A lease contains clauses which give each flat the right of 'support and protection'?? Which means that no flat owner can do anything which would cause detriment to another flat eg. downstairs flat removes supporting wall, causing the flat above to become structuraly unstable. The whole point of leasse obliges each flat to look after the other leaseholders' interests.

If you own "share of freehold", you should have no problems obtaining a mortgage on that point. When you own a share of the freehold, a company is formed which owns the freehold. It is the company that issues you with a lease and you own a share in the company, rather than a share of the freehold, iyswim. So you still have the original lease.

In the OPs case, they would effectively own the company which owns the freehold. Each flat should still have a lease, or the flat downstairs should at least.

The problem comes where each flat owns it's own freehold and there is no lease. One person effectively owns a floating freehold sitting over someone elses and they have no right of support, so (I'm giving a ridiculously extreme example), upstairs could remove the roof entirely and allow the rain to pour directly into the building. Downstairs would have no actual right to the roof above the upstairs flat and there mightn't be a great deal they could do about it. So mortgage compaies shy away, as they would from a defective lease.

Doozergirl

loopy25 wrote:

Could you tell me a bit more about this. I am trying to get a new mortgage on my flat but since I bought it I have also bought a share of the freehold and am having problems with getting a new mortgage.
Sorry for the silly questions but do I still have a lease? I really don't know anything about it as my partner at the time sorted it out.

Please help!
Thanks very much!:o

I've tried to answer your question in a pretty roundabout way, above!

JennyW_2

aah wrote:

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....

yes this is correct. We live in a ground floor flat which is part of a converted house. My FIL is the freeholder and there are separate leases for both the ground and first floor flat.