Confusion over selling split property - deeds, mortgage & more

Angelhoney

Hi
My question is actually two separate ones about the same properties so I hope it is ok to ask them together!:j
The situation is that we had a house which was divided into two - now there is a completely separate basement flat (own entrance/council tax etc). The original house is a three-bed and the flat is a two-bed. Our lawyer said at the time that we would need to change the title deeds when it came to the time to sell (if we wanted to sell them separately that is).
We are now at the point of wanting to put them on the market but would probably prefer to sell the flat first of all. My first question is - would it be better to sell them separately or together? Does anyone have an idea of how compliated or costly it is to change the deeds? Also price-wise does it make sense to sell them together (one being like a granny flat) or apart? I was wondering about tax/property values on so on..
Actually this is turning into three questions! The other thing is that the house has a mortgage on it which was got before the new flat was constructed. The mortgage lenders have not been informed about the new property but does this make a difference when we try to sell? My sister is the one living in the house and has the mortgage so she is afraid she will get in trouble somewhow but I am not sure if she has done anything wrong. The new flat is all legal with council, building regs etc. If we are able to sell the basement flat first we would be able to pay off the mortgage and then put the house on the market. So maybe that would be a better option if the mortgage on the house could be compromised.
Anyhwow, trust that all makes sense! Really would appreciate any advice or insight.:)

G_M

What is the status of the flat?

You say "all legal with council, building regs etc." but what does the planning consent say? Is it an annexe to the house, or a separate property, with its own council tax, postal address, utilities etc?

If you wish to sell the flat separately, it will need the above. It will also need a lease drawn up and you'll have to decide whether to keep the freehold to the flat, or perhaps sell joint ownership of the freehold to whoever buys the flat's lease.

Alternatively you could sell both together, with the flat remaining an annex to the house and the new owners owning both.

Or indeed, even if the flat is separate (CT, address etc) you might find a buyer who wants both.

The mortgage adds a further complication. Presumably as the house & flat are currently still on a single Land Registry Title, the mortgage is against that Title? You could therefore not sell any part of that Title (ie the flat) without the consent of the mortgage lender. (selling the flat will reduce the value of the Title that remains, possibly below the amount of the mortgage loan).

You could of course perhaps pay off the mortgage with the funds received from the sale of the flat. That might resolve the issue.

Angelhoney

Thanks for your reply. The basement flat has it's own address, council tax etc all separate. I am not sure about the planning consent - have to check that with my Sis. as she organised all buidling work etc. Could you explain what you mean by a lease? Is that connected to the property deeds - and freehold/leasehold issues? I also need to get info about the land registry to confirm the mortgage status. However, from what you said, we would have to get permission to put the flat up for sale ( the mortgage is small so the value of the title would not be less if the flat was sold). It seems like it would be less complicated to put both properties on the market together?

da_rule

Is the property registered at the Land Registry?

If you chose to sell them separately then the most likely scenario is that house or the flat will be sold as a leasehold property and the other will be freehold. The lease interest will be noted on the deed (or the title register if it's registered) of the freehold property. You could sell them both as leasehold and retain the freehold yourself, but this would make you liable for certain things that you may not want.

If the property is registered, and you sell the flat and decide to give this the leasehold title then it will be a sale of part. The new owner will register the lease with the Land Registry and it will be noted on the register for the house.

If the property isn't registered, the lease will be noted in the deeds and the lease will be registered at the Land Registry by the buyers solicitor. When you sell the freehold the buyers solicitor will take the deeds and register them with the Land Registry.

All your solicitor would have to ensure is that new lease is marked on the deeds (if not registered). Investigating the title and registering the sale is the work of the buyers solicitor.

In terms of legal fee's you may pay double (as selling two properties) if you decide to split the property. You just need to decide if the return is worth it.

Land_Registry

At the moment I assume you have one registered legal title comprising the one property.
As part is now a flat the assumption is that you would create a lease and sell that whereupon the buyer would register that lease and it would be noted on your freehold title. Your costs would inc drawing up the lease but the buyer pays to register.

As it's a basement flat You may find a lease is the only/best option but something to explore with your solicitor and indeed an estate agent to see where the value is in selling both, together or not. Creating a lease does not preclude you from also selling the freehold of course although if you go that route you may find it's easier/better to try and sell both together either at the same time or as a job lot

You will need your mortgage lender's consent to sell of part and/or to lease part.

The first thing to do is probably to weigh up where the most value is in marketing the properties as that is presumably the driver here to maximise revenue but balanced with the legal and conveyancing complexities?

Angelhoney

thanks for info everyone! I think I am clearer about the Freehold/lease part now. As Land Registry Rep says, we are trying to find the best way to sell with consideration to revenue benefits/taxes and legal work. I will post again as soon as I have more info about Land Registry etc. Was also wondering about Captial Gains Tax as I understand it would have to be paid on the basement flat but not on the house (my sister has lived there for years). Would that be the case if it was sold as an annex to the main house?