Combining two flats.

pjaj

About 20 years ago a house was converted into two flats.
The freehold was invested in a non-trading limited company, the sole shareholders of which are the two owners.
One of the current owners now wants to sell their flat and the other owner would like to buy it with a view to reverting the property to a single dwelling.
Three questions.

1. Does the second home stamp duty apply or could it be reclaimed once the conversion is complete?
2. What planning permission would be required to do the conversion?
3. What other legal steps are needed to change the deeds and status of the property?

The reasons for doing this are quite simple. The combined market value of the two flats is about the same as an unconverted property in the area. The existing mortgage on the flat is very advantageous and may be able to be kept. In order to get an equivalent sized house in the area considerable extra legal and estates agent's fees and stamp duty would have to be paid. It is quite possible that the two owners can come to a mutually acceptable agreement without involving estate agents at all.

G_M

pjaj wrote: »

Three questions.

1. Does the second home stamp duty apply or could it be reclaimed once the conversion is complete? Yes. When you buy the other flat it will be your 2nd, so additional SDLT will apply. Since you o not intend to dispoe of your current min home within 3 years you cannot reclaim this
2. What planning permission would be required to do the conversion? Planning Permission to convert 2 properties into 1. Speak to the LA Planners.
3. What other legal steps are needed to change the deeds and status of the property?You would need
   

*to combine the freehold Title, and the 2 Leasehold Titles, into a single Title.
* Building Regs certification.
* the consent of the mortgage lender, or, more likely, would need to pay off the current mortgage and apply for a neew one

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eddddy

pjaj wrote: »

The reasons for doing this are quite simple. The combined market value of the two flats is about the same as an unconverted property in the area. The existing mortgage on the flat is very advantageous and may be able to be kept. In order to get an equivalent sized house in the area considerable extra legal and estates agent's fees and stamp duty would have to be paid. It is quite possible that the two owners can come to a mutually acceptable agreement without involving estate agents at all.

The legal fees for buying a leasehold flat, then extinguishing the leases, may not be much lower than the legal fees for selling and then buying a freehold house.

The current mortgage will be for the leasehold flat, a new mortgage would be required for the freehold house. However, the current mortgage terms might be portable.

3% higher rate SDLT might cancel out any potential SDLT saving.

Some planning authorities are against combining dwellings - as it counters their efforts to increase the number of homes. You'd need to seek advice from your local authority.

It's unusual for a single house to be worth the same/more than two flats (which is why developers do convert houses into flats - to make money). But perhaps your area is non-typical.

As part of the conversion back to a single dwelling, the property would have to meet current building regs. As the conversion was done 20 years ago (to meet regs as they were then) this might involve some costly updating work.


Edit to add...

Also you would not be able to get a mortgage for a development project (i.e. combining two flats).

If you don't have sufficient cash, you would have to get a bridging loan to pay off the mortgage on the current flat, pay for the new flat and pay for the conversion.

Then apply for a new mortgage when it's finished.

pjaj

It's unusual for a single house to be worth the same/more than two flats (which is why developers do convert houses into flats - to make money). But perhaps your area is non-typical.

Agreed, but the current valuations for the two flats are £600K and £350K. The going rate for an unconverted house of an identical size and floor plan in the same area is in the region of £900K - £1.1M depending on condition.

Bearing in mind the stamp duty on the full purchase of a £1M property, the savings in only buying a £350K one would still, probably, outweigh the added complications. Not to mention the convenience to both parties, one could move out as and when convenient, there would be no pressure as they are on good terms, the other would just move downstairs!

Doozergirl

Planning permission really depends on where you are. In many Local Authorities it is permitted development. In others (Royal Borough of Kensington & Chelsea springs to mind) it would beed planning permission and would likely be refused. You really need to check.

I think Building Regulations only apply where you are carrying out work on the building as you would in an existing house, it wouldn’t have to comply to the stringent regulations in place for new dwelling conversions.

eg. I think if your work ended up with it being over three storeys or more then those regs would apply as if you were carrying out a loft conversion, but you wouldn’t have to introduce insulation to all of the walls as you would if you were creating an extra dwelling.

It would be worth employing a private Building Control Officer to guide you through their expectations as I suspect some discussion and negotiation could take place.

I am actually a little unsure in this one, but really don’t believe that new dwelling regs would apply. Certainly in our work we carry out a lot of work like this but it’s so extensive that it’s like a new dwelling anyway.