Freehold Flat Remortgage Help

tigernick

Hi All,


I'm trying to remortgage my current residential mortgage to to a Buy-to-Let. The issue is I have a freehold flat which is apparently unnaceptable to most Buy-to-Let lenders. I'd like help understanding the least costly option related to getting a lease on my flat as per the description below.....


Background
I live in atyneside flat, imagine a row of semi-detached properties. Now imagine the door to each semi-detatched, however rather than there being one door there are two. The properties were split into flats years ago to accomodate greater demand for housing, a simple upstairs/downstairs arrangement.

My Freehold Situation
Some of you may know the 'tyneside lease' arrangement, my situation is slightly different and is referred to as a 'south tyneside lease'. Basically I own the freehold to the semi-detached property encompassing upstairs and downstairs, however there is a lease on the upstairs. BTL Lenders (apparently) do not like lending on a freehold flat, which means i am having to persue getting myself a lease somehow.

For clarity i live in the ground floor flat (lets sayno. 2 my street) which is the one with the freehold to both flats, no. 1 my street is the one with a leasehold upstairs. My property is referred to in the title deed as no. 1 & 2 my street, all of my documentation from my current resdiential mortgage lender referrs to the same. In effect it's referencing the whole freehold, not just my downstairs flat, no. 2.

My Question
The question is, how do I get to a position where I have a lease on my flat no. 2 my street to make it more appealing to BTL lenders? As with all things I could use a low-cost solution!

Thanks in advance

Richard_Webster

It isn't a freehold flat - you own the freehold of the whole building subject to the lease of the other flat.

Most mortgage lenders will accep this sitaution - you just have to refer them to 5.81 & 5.8.2 of the CML Handbook: http://www.cml.org.uk/cml/handbook/englandandwales#C1983

These paragraphs say:

5.8.1Unless we indicate to the contrary (see part 2), we have no objection to a security which comprises a building converted into not more than four flats where the borrower occupies one of those flats and the borrower or another flat owner also owns the freehold of the building and the other flats are subject to long leases.

5.8.2If the borrower occupying one of the flats also owns the freehold, we will require our security to be:

the freehold of the whole building subject to the long leases of the other flats; and
any leasehold interest the borrower will have in the flat the borrower is to occupy.

This is a continual problem - brokers and people in lenders' offices don't understand all these things. If you can find my website and the "shared freeholds" section of it, you will find it is all set out there and the advice is to simply say you want a mortgage on a flat and let the solicitor sort out the legal details ie. don't give the lender half information. Now you will have to quote 5.8.1 at them and they will have to look it up and hopefully come back and say that they will lend!

kingstreet

From Virgin Money criteria, for example;-

VM does not accept freehold flats except in the Tyneside flat scenario where there are reciprocating lease/freehold arrangements.

If anyone was going to lend on these it's Northern Rock.

Richard_Webster

Virgin Money don't seem to understand the CML Handbook themselves.

5.8.5. deals with the Tyneside/Criss Cross flat scenario and they say:

5.8.5 Does the lender accept security which comprises one of two leasehold flats in a building where the borrower also owns the freehold reversion of the other flat and the other leaseholder owns the freehold reversion in the borrower's flat? If so, are there any specific requirements?
Yes, provided that both interests owned by the borrower are charged to Virgin Money plc.

OP's scenario is also acceptable - see

5.8.1 Does the lender accept security which comprises a building converted into not more than four flats where the borrower occupies one of those flats and the borrower or another flat owner also owns the freehold of the building and the other flats are subject to long leases?
We have no objection to this kind of security. However, where the borrower owns the freehold we will require a charge over that title also.

So I suppose they put their comments (that Kingstreet mentions)in for a reason, but the Tyneside scheme doesn't have a freehold flat because the flat you buy is leasehold - you just happen to own the freehold of the other flat.

tigernick

Hi Richard,

Thanks a lot for your reply, I was hoping someone would say what you've said. I dont see that a lease needs to be created either but unfortunately i'm not able to speak to the lender directly. I found your website and the pages are very very useful. Fingers crossed that the lender see's the light!!

Are there any other articles/laws i can throw at them to justify my stance that you can think of?

Thanks