Possible to sell flat and freehold separately?

huntaaar

Hi all,

I am currently negotiating the purchase of a flat.

The flat is currently leasehold but the seller also part owns the freehold for the converted building (I think it may be a family property converted to flats).

The seller is offering to sell a share of the freehold along with the flat.

The flat is worth about £275k. I was wondering if it would be possible to purchase the flat and the freehold separately? I would offer to pay £250K for the flat and £25K for the freehold.

The aim being to bring the sale price of the flat under the 3% stamp duty threshold.

Is this Possible? worthwhile?

Many thanks for any advice, first time buyer entering into a world of the unknown!

Fire_Fox

What does your conveyancer say? Might work since they are two separate transactions, but my reservation would be that the share of freehold has very little value away from the long lease so HMRC could deem this tax evasion.

Anyway if the flat could in theory be worth £275K, in practice very few buyers will pay over £250K because of the stamp duty threshold. IMO you could be overpaying to offer anymore than a few K on top for the freehold, fixtures and fittings. Have you researched land registry sold prices for the block and area?

As a general bit of advice for an FTB of a leasehold property read this website inside out
http://www.lease-advice.org/publications/

richardw

You buy a lease for a flat, how long is the lease?

propertyman

Sadly this in case where LAS cannot help. The average conveyancer will scratch their head too.

If
-the freehold is a separate title and not owned by a company in which the vendor has a share, and
-there is no restriction that prevents them from being sold one with out the other

then it can be a separate sale.

As to value that depends how long the lease is and the ground rent if any. The shorter the lease and the higher the ground rent, the more the freehold, and your interest in it is.

Very often where lease are shorter and extensions required, the flat is marketed at the price assuming the lease need not be extended.

All of which needs valuation advice.

G_M

You can buy a lease on its own.

You can buy a freehold, or share of freehold, on its own.

You can buy the two at the same time (though they are two seperate purchases).

It is NORMAL in these circumstances to buy them both.

BUT...
You cannot avoide SDLT by buying them seperately. SDLT rules require you to declare any linked sale, and for SDLT purposes they would be considered by HMRC as linked, and their values combined.

see

http://www.hmrc.gov.uk/sdlt/calculate/linked-transfers.htm

If you use a solicitor, he will not sanction this attempt at tax evasion.

If you do the conveyancing and/or SDLT return yourself, and attempt this, you will be commiting tax evasion and may be prosecuted.

huntaaar

richardw wrote: »

You buy a lease for a flat, how long is the lease?

82 or 83 years

propertyman

On this can only say is

Propertyman 1 HMRC nil

They are two distinct property interests..... and different ownership structures and purposes- and as long as the values are representative of course.

If the company owns the freehold and the share is transferred at a premium that too works, however very often dopey lawyer uses bog standard articles that prevent share being passed at a premium, while conveying a property to his clients not explaining the inherent valae that has to be addressed.