Change Freehold Flat to Leasehold ?

Johnocyprus

My parents (who are in their 80's) own and live in a ground floor of a large 1920's house which was split into a ground floor flat and a first floor flat each of which is self contained with a separate entrance. My parents own the freehold of the ground floor flat whilst the owner of the first floor flat owns the freehold of the upstairs flat.

The owner of the upstairs flat, who is a businessman, has approached my parents with a view to buying their ground floor flat.

My question is .... would it be beneficial to both my parents (and the owner of the upstairs flat ) to change the title from freehold to leasehold. I understand that this change would make the property suitable for obtaining a mortgage and thus easier (and more valuable) to sell? If it is beneficial and is possible is there any advice which you can give before my parents approach a solicitor?
Thanks in anticipation

trafalgar_2

Surely you mean from Leasehold into Freehold......................not the other way round

http://www.themovechannel.com/howto/find/freehold-or-leasehold.asp


if you do want to purchase the lease then this will help
http://england.shelter.org.uk/advice/advice-192.cfm

Johnocyprus

Thanks Trafalgar for your reply. I appreciate your point but in my parent's circs above were the flat to be changed to leasehold make it possible for prospective buyers to get a morgage (which as a freehold it is not possible ) and thus be beneficial?
Regards

roger56

If you do change to leashold make sure it is at least 125years. Mortgage companies don't like leases below 60/70 years.
Also, it may be worth checking out the new commonhold introduced in the last year - I believe it is preferable to having a leasehold.
As always though take professional advise on these matters before signing.

Spendless

Why does the flat need to become leasehold?

Why can't a mortgage be obtained on a freehold flat?

You mention that your parents own the place so presumably they got a mortgage for a freehold flat?

What happens if and when the bloke upstairs buys your parents place? Do they have to pay him rent?

Sorry i'm just confused here

dougk_2

I think what the OP is saying is the Parents own the ground floor flat but the bloke wants to have it on a leashold basis - right?

Seems a good idea to him as the property won't be worth as much as it would be Leasehold not freehold so would get it cheaper.... but then I would rather own the whole lot and do as I see fit with it (convert it to a single dwelling again if I wanted)

Johnocyprus

Sorry- I seem to have confused everybody

Roger-yes, it would be for a minimun of 125 years

Spendless -my parents paid cash for the flat when they retired.

Doug K - forget the bloke upstairs for now, just wonder if by converting their freehold flat to a leasehold interest they'd make it worth more because prospective buyers would be able to get a mortgage because it seems that most mortgage companies won't touch freehold flats.

dougk_2

In that case no I think the property would be worth less. A freehold is better than a leasehold.

In the case of mortgages yes it may make it easier to sell as a leasehold property as it will reach a bigger market if it is easier to get a mortgage, but then you won't get such a high price I suspect.

Although you said forget the bloke above - hes probably the best bet as he will hold the freehold to the property completely so the mortgage company should be happy with that!

Murtle

Sorry if what you are talking about, is one house split into two dwellings, one upstairs and one downstairs - then there should be NO problem in obtaining a mortgage. I assume, these changes are on the deeds etc. There is more of a problem if it is a leasehold, as then it has to be of a certain time frame etc. I nearly bought one myself bottom part of a house, but then I found another more suitable one which is leasehold....wish I had the freehold

Murtle

sorry - if the guy upstairs had the freehold of the place, then he can charge ground rent and a service charge. I currently pay a nominal ground rent charge, and a not so nominal service charge. Speak to an estate agent about the prospects of selling the property under each method. I think they would prefer the freehold - most people would prefer the freehold. The guy upstairs would be onto a winner if you sold this to him.

EdInvestor

The way these things are normally done is that there is a freehold for the building itself and then the 2 flats are held separately on long (99 year+) leases.

This is a much more desirable arrangement than 2 freehold flats. A freehold flat can be very difficult to sell: most lenders will not look at them.

There are good reasons why: for instance, who is reponsible for big jobs like repairing the roof? At the moment it will all fall on the top floor flat.Under the normal system the costs would be shared. How is insurance being arranged? Who pays for what when there are problems with shared parts such as the outside walls?

What you probably need to do is to agree with the upstairs owner to change the title deeds to leasehold and set up a new one for the freehold which the pair of you would own jointly. You can jointly decide on how long the leases are, how much the ground rent is, etc.Split the solicitor's bill between you.

This will most certainly add to the value of both properties and shouldn;t cost much to do