Buying a house & splitting into 2 seperate flats

Big_Zee

Hi,

I am interested in purchasing a property which is currently one large house but is split into 2 seperate flats. The owner lives in one flat and rents the other out to his friend on a non contract basis.

The property is old (couple of hundred years) and at one point I guess must have been a large house, but it looks like the splitting into 2 flats must have occured a very long time ago (at least 10- 20 years).

If I purchase the property my idea is to split it officially into 2 flats with the view of selling one flat and then re-mortgageing the other flat (I would be buying the initial freehold with cash only).

My question is what would be the best way to split up the one freehold into flats - either:

1/. Split it into 2 where both flats have a share of freehold

2/. Put 2 seperate leaseholds in place.

I initially thought having a freehold and 2 seperate leaseholds would be best, but it seems there is a lot of hassle in that the freehold owner and the leasehold owner cannot be the same, so it would as a minimum require me to put either the freehold or the leaseholds into someones elses name, and has all the leagal costs etc that would go with it.

So would just converting one freehold into 2 share of freeholds be a better option?

Thanks in advance.

Richard_Webster

Propertyman hasn't seen this yet!

So would just converting one freehold into 2 share of freeholds be a better option?

Has OP actually thought through and understood what he means by this? Possibly he has been confused by the use of the term "share of freehold" - cue Propertyman to appear and comment that that is why he is pursuing whoever invented the term.

When EAs use this term they normally are talking about a situation where say A and B together own the freehold of a building and A has a lease of one flat and B has lease of another. (Same principle would apply if there were up to 4 flats and the freehold owned by up to 4 individuals). However that does mean that leases have to be created.

That isn't a problem because if you own the freehold you grant a lease to your buyer of one flat (P1) - you don't have to do so to yourself first! You then sell the other flat by grating a lease of it to its buyer (P2). if you want to get rid of the freehold you then transfer it to P1 and P2 together. Of course regardless of to whom you grant the leases, there are legal costs in doing so, which will typically be higher than an ordinary conveyance of say a freehold house at the same value, as there is more work involved.

What I suspect OP was thinking of was to simply transfer the freehold to to P1 and P2 so they own it together. Don't think they would be happy with that because:

a) it means they together own the whole property and don't have separate parts that are "theirs"; and
b) they can't get a mortgage on the separate parts.

If you want to make money and you have really thick cash buyers then why not:
a) Sell Flat 1 and do so by transfer of the freehold of just that flat;
b) Sell Flat 2 and do so in the same way for that flat;
c) Retain the loft space in your freehold ownership?

After some years the owners of the two flats will realise they have been had as they won't be able to sell their flats to anyone wanting a mortgage or with any sense, and will have to approach you to help them put the whole thing right. You can then charge them a lot of money for transferring the loft space to a company they will have formed to grant leases of the respective flats to make them mortgageable!