Option of Leasehold or Share of Freehold

Fire_Fox

Paul_London wrote: »

If I choose to buy on leasehold terms I'm being offered a new 125yr lease.

I think the best route for me to go down would be to have the other leaseholder come and share the freehold with me. That way we are both on equal footing. I can't own it all or I won't be able to get a mortgage on the property.

Why won't you be able to get a mortgage being sole freeholder? It won't be a freehold flat, there should be a leasehold title and a separate freehold title as already explained. Leasehold is like renting the use of the space within the building for a very long time, freehold means you own the entire structure (roof, walls, foundations) and grounds.

Freehold flats are rare in England and Wales, that means the top flat would own the top half of the building (roof and walls) and the bottom flat would own the bottom half (foundations and walls). Obviously you both benefit from the roof and foundations so you need to work together to keep them in good repair, hence leasehold with the freeholder(s) being legally responsible for repairing and maintaining the entire structure.

Paul_London

Makes sense now!

Thanks again for all your help on this

Fire_Fox

Remember you must clearly tell your lender it is a leasehold flat AND a separate title for the freehold which you will be part or sole owner of. Make sure it is correct on your mortgage application.

Paul_London

I will do.

Big thanks!

propertyman

I see Firefox has tried to help but its easy to not appreciate the complexities and I am not sure that you would end up approaching it the right way and you can guarantee the EA won't understand.

The freehold property is divided into two flats but only one is subject to a lease, Andrew's flat A

Nick owns the freehold and occupies the space for flat B

What he is really offering then is

1 The above freehold, which is the entire building except Andrew's flat. Nowt to do with freehold flats.

2 A flat for X on a 125 year lease.

The estate agents break down is therefore doubly misleading.

You are therefore going to have some trouble buying the property as a freehold title with retained property subject to one long lease of part of it are not modelled for by most mortgagees - for them it's the house or a flat

Your purchase therefore has to be on the basis of either
a; you buy the freehold and that before completion you would grant a lease of say 999 years to yourself*
b; just by the flat on terms to be agreed say the 125 years offered.

That has to be set out before you make a mortgage application

* the problem is that you normally cannot be the freeholder and grant a lease to yourself - one person cannot hold two titles in this way and when registered the HMLR will boot it out. Ideally you purchase the freehold as a company and have two shares, one which you can sell to flat A should he want to join in now or later.



Do note that if you buy the flat only and he later sells the freehold, he msut offer it you both first.

Paul_London

Thanks again all for your help on this matter!

I'm going to make an offer today

propertyman

Paul_London wrote: »

Thanks again all for your help on this matter!

I'm going to make an offer today

Ok good luck- the offer would be for the freehold of the property or the flat, no share of freehold guff...

If you agree terms , then the mortgage would be for a new lease to be granted of say 999 years at a peppercorn rent.

That way most of the value of the loan is in the flat, and therefore mortgaged, and the value of the freehold is paid out of your savings.

Your offer is £200000 for the freehold.

Your mortgage application is for a new lease to be granted worth say £ 198,000.

You'll need to get your solicitor prepared to do that, a conveyancer won't be able to. If he is prepared to draft the lease then great.