Buying a leasehold flat with the freehold of the whole building

Didymus

Hi,

We're first time buyers and have seen a flat in the perfect location for us and with everything we need. It is ground floor with one flat above, has direct access to the garden and has no chain as the property is currently owned by the local council.

We've got our agreement in principle and we are viewing the property next week, so everything is going well so far, however I'm unsure about one thing in the advert for the property. It states that this is a leasehold flat with a new 999 year lease and that the freehold for the building is included the sale. Will this cause us issues in getting a mortgage and is there anything we need to know about this before deciding on whether to put in an offer?

Thanks in advance!

ThePants999

It's not going to cause any mortgage problems.

For you, it has pluses and minuses. The pluses are that, effectively, none of the standard disadvantages of leasehold apply. You'll lease it from yourselves, so
- any ground rent due, you pay to yourself
- any service charge due, you pay to yourself
- should you want to change the lease, you agree it with yourself
- should the lease demand you get the freeholder's permission for anything, you get it from yourself
etc

And it also has some extra value, because the other flat in the building will become leased from you. So if there's any ground rent, it's paid to you. If they want to extend their lease, it's you they'll be asking and paying. Etc.

The minuses are that you're responsible for upkeep of the building. This isn't really extra financial cost - the leases will say who's responsible for what costs, but they'll PROBABLY say something sensible like each flat is responsible for half of the costs - but it is a bit of extra hassle. You'll be the ones sorting the building insurance, arranging for any repairs, etc.

From a quick Google, https://www.freehold-sale.co.uk/resources/freeholder-responsibilities/ looks like a decent summary, though bear in mind that it's biased as it's from a company that wants to buy freeholds.

Tom99

Worth double checking whether you are buying the whole of the freehold as explained above, or are sharing it as joint owner with the upper flat owner.

da_rule

Agree with Tom99, this seems somewhat strange, as you may as well just buy the freehold without the lease. You can then occupy the parts of the property that aren’t subject to the other lease that already exists.

Didymus

The other property is owned and occupied by someone else on a leasehold basis. The ground floor flat, which we would be buying also holds the freehold to both properties. The lease for the ground floor has just been extended for 999 years.

Didymus

Thanks Tom. The property was previously owned by the council and they own the freehold for the whole building, the advert states that the flat is leasehold but the freehold for the whole building is included in the sale.

AdrianC

Emywoo84 wrote: »

The other property is owned and occupied by someone else on a leasehold basis. The ground floor flat, which we would be buying also holds the freehold to both properties. The lease for the ground floor has just been extended for 999 years.

Emywoo84 wrote: »

Thanks Tom. The property was previously owned by the council and they own the freehold for the whole building, the advert states that the flat is leasehold but the freehold for the whole building is included in the sale.

This all suggests you're a bit confused.


There are three things in existence.
1. Leasehold Flat A
2. Leasehold Flat B
3. Freehold for building.

I suspect that what you're buying is 1 + (50% of 3), with the other flat owner owning 2 + (50% of 3). That doesn't leave any of 3 for the council to own.

If you were buying 1 + (100% of 3), then is 1 being sold by the flat's current resident and 3 being sold by the council? If so, why is it being sold to you, and not 50/50 with the other resident? Why can you not just buy the flat?

I strongly suspect the council USED to own 3, but sold it to either the current owner of 1 100% or 50/50 between the owners of 1 and 2.

Didymus

There are only two flats in the building, the ground floor and the 1st floor. The ground floor property is owned by the council as a leasehold flat with a new 999 year lease. The council also own the freehold to the whole building and the advert for sale says 'Sold with THE FREEHOLD FOR THE BUILDING'.

I don't think I'm confused, but you may be able to shed light?

AdrianC

Emywoo84 wrote: »

There are only two flats in the building, the ground floor and the 1st floor. The ground floor property is owned by the council as a leasehold flat with a new 999 year lease. The council also own the freehold to the whole building and the advert for sale says 'Sold with THE FREEHOLD FOR THE BUILDING'.

I don't think I'm confused, but you may be able to shed light?

Ah...

So the council currently own all three - 1 + 2 + 3.

The council are selling 1 + (100% of 3).
The council are not selling (currently) 2.

Tom99

AdrianC wrote: »

Ah...

So the council currently own all three - 1 + 2 + 3.
The council are selling 1 + (100% of 3).
The council are not selling (currently) 2.

Not quite.........

Emywoo84 wrote: »

The other property is owned and occupied by someone else on a leasehold basis.

Evie_H

We bought a flat in the same situation 2 years ago - ground floor flat in a converted house with a freehold for the entire building plus a lease for our flat. It was explained to us that the lease needs to be in place for the purposes of mortgaging, even if you own the freehold. I can't remember the exact details, but it sounded like a standard thing. We had no issues getting a mortgage on it at all.