Change from freehold flat to leasehold - possible? Expensive?

MissMayflower27

We are looking to purchase two properties in a converted barn from one vendor, essentially a ground floor barn and first floor flat both of which taking up one end of an old barn and piggery. The rest of the barn is split into two houses which are privately owned and have no link to these properties.

Both properties are freehold and only the first floor property is referred to as a flat. I'm assuming the other property will just be the barn.

We've been advised that there are no lenders who will currently lend to us on a free hold flat therefore we would need to change the freehold to leasehold with a long lease. I'm assuming if we did this, the barn would own the freehold so as we own the barn we wouldn't really have an issue with the freehold. We are not looking to sell the properties seperately and wish to live in both (on is to be a granny annex).

So my question is, is it possible to change from freehold to leasehold and if so, how much is this likely to cost? Is it an easy process?

thank you

sailerboy

First, are you sure these are both freehold? Not 'share' of freehold?

the latter means that there is a lease on each, plus a seperate freehold which is jointly owned by the same owners as the 2 leases. Very common and not a problem for mortgages.

Secondly - where is this? In Scotland, freehold flats are common, and not a problem. The system is different to England.

If however, they are genuine freehold flats, in Eng/Wales, then yes, there is a problem. Do not buy unless the seller first creates a lease for each property. Whether you choose to buy the freehold as well as thoses leases is up to you.

MissMayflower27

thank you

I'm not sure on the exact position although the vendors confirmed both freehold before so I assume no leases in place.

i think one property is classed as a farmhouse so i'm assuming the flat issue won't affect that property, only the one treated as a flat?

we are in the UK

I'm assuming this issue is common and that there are few mortgage companies who will mortgage on freehold (which does make sense when i think about it) - nothing to do with us only having a 15% deposit? So the vendors will have this issue with any potential purchaser unless they pay cash?

Fire_Fox

MissMayflower27 wrote: »

Both properties are freehold and only the first floor property is referred to as a flat. I'm assuming the other property will just be the barn.

We've been advised that there are no lenders who will currently lend to us on a free hold flat therefore we would need to change the freehold to leasehold with a long lease. I'm assuming if we did this, the barn would own the freehold so as we own the barn we wouldn't really have an issue with the freehold. We are not looking to sell the properties seperately and wish to live in both (on is to be a granny annex).

I'm not sure on the exact position although the vendors confirmed both freehold before so I assume no leases in place.

i think one property is classed as a farmhouse so i'm assuming the flat issue won't affect that property, only the one treated as a flat?

I'm assuming this issue is common and that there are few mortgage companies who will mortgage on freehold (which does make sense when i think about it) - nothing to do with us only having a 15% deposit? So the vendors will have this issue with any potential purchaser unless they pay cash?

Don't assume, clarify and get back to us. It is not common, freehold flats cannot get a mortgage in the normal way. I am not even sure it is legal to set up a new build/ new conversion for residential use this way any more. The reason freehold is a nightmare - imagine if the owner of the downstairs property let the foundations collapse or the upstairs property let the roof cave in .... You may not be planning to split the units, but the lender might if you default and the next purchaser might.

If they are freehold find out how the units are currently organising repairs and maintenance between the different freeholders in the one building, and how the current owner feels about converting the two remaining units to leasehold/ share of freehold. This will have to be done as part of the conveyancing.

If you are in England or Wales you might find useful stuff here
http://www.lease-advice.org/publications/

MissMayflower27

Thanks Firefox, i'm speaking to the vendors tonight so will be able to clarify then.

At the moment, the flat is owned by the sons of the lady owning the farmhouse (now deceased) - the flat is rented out so any costs have just been paid by their family. I'm not sure when the conversion occurred but the vendors family have owned the whole property for many years even when it was previously a working farm. I thinking this is why this might not have come up as an issue before.

but it makes sense not to have the flat as freehold given what i've been reading as it sounds a legal nightmare potentially

Richard_Webster

If the same person owns the whole building why ever would there be a lease of the flat? He owns it all probably under one single title - it is probably as simple as that. He is selling it all so naturally he sells it all freehold, because that is what he owns. Highly unlikely there are two existing separate freeholds.

Get out of the idea that each unit must have its own separate title - seems to have caused confusion on this thread.

Think about it - do you think a Council who own a large block of Council flats have a lease for each flat. They just own the freehold of the whole building under one title or it could part of a title which covers a vast area bought under a conveyance years ago when the Council acquired the land for a big estate from a single landowner. They let the building out to short term tenants - unless people have bought their flats under the Right to Buy there don't need to be any leases. Most likely same thing here.

Problem is more likely about mortgageability of a mixed use - if there is a mixed use here. It may be difficult to get an ordinary residential mortgage on a building with a part residential part agricultural use. That could perhaps be the difficulty - the lenders will only lend on the residential part which therefore has to have a separate title.

Possibly the seller could grant a lease of the flat to OP and then under the same contract transfer the freehold of the whole building to a company owned by OP. Op would have to pay the extra legal costs of drawing up the lease, which could be £500-£1,000.

How will OP use the "barn"? Its planning status could be important. there may be no mixed use. If its lawful use is for storage etc ancillary to the residential use of the flat above then it will be analogous to a freehold coach house over garages - only here OP will own the area below as well. If that is the case can't see any problem with OP buying the whole thing freehold with a residential mortgage on it all. Just like a detached house with a double garage taking up the whole ground floor!

propertyman

So it is a barn fully converted and divided vertically into three, two of which are freehold houses and the third divided horizontally into a GF and FF property?

I suspect the owner simply owns the third as one or two freeholds neither of which reflect the division of the property( ie the other houses have a house which is within the one freehold title, a square within a square, rather than your bit that straddles two, a rectangle sitting over two squares).

If the GF and FF are not entirely separate then you are simply buying a freehold property arranged as two inter linked units eg if there is an internal stairway and you can go from one to the other without going outside and not two flats, and therefore can get a mortgage. You then merge the two freehold titles, being ready to grant leases if you have to, at a future date to sell them off.

However 2 freeholds is I agree highly unlikely- the vendor might not understand what he is talking about and simply saying two freeholds not realising that it's nonsense

MissMayflower27

propertyman wrote: »

So it is barn fully converted and divided vertically into three, two of which are freehold houses and the third divided horizontally into a GF and FF property?

I suspect the owner simply owns the third as one or two freeholds neither of which reflect the division of the property( ie the other houses have a house which is within the one freehold titles rather than a building, yours, that straddles two).

this is it

the GF and FF are seperate though, different external front doors and no shared space. the GF as i understand is registered as a farmhouse the FF as a flat. The whole building is residential. The FF has been rented out for over 12 years to private tenants. Both the GF and FF have seperate legal title (not sure if this then means automatically both freehold?). They are being sold seperately but we want to buy both (although have been told can't do on one mortgage as seperate titles so having to get a second residential mortgage)

propertyman

[QUOTE=MissMayflower27;55929971.__Both_the_GF_and_FF_have_seperate_legal_title_(not_sure_if_this_then_means_automatically_both_freehold?).__They_are_being_sold_seperately_but_we_want_to_buy_both_(although_have_been_told_can't_do_on_one_mortgage_as_seperate_titles_so_having_to_get_a_second_residential_mortgage)[/QUOTE]

Well if you have time go on to HMLR and look at the addresses and see what titles are granted it could be 2 leases

It is possible to grant freehold titles in this manner as explained above and as RW says, simply occupied by renters in the past, as 2 flats.

If so, in order to sell and get full value, you should come to an agreement on price so that you can merge the two titles and grant two leases.