Freehold to leasehold

Bowlsy1982

Hi All.
I have a mortgage on a freehold flat and am trying to remortgage. Only three companies will consider lending on a freehold flat. I’m all ready with one of them and it’s part of another one of the three so they won’t lend to me either. Leaving one! I’m considering approaching the other two freeholders and converting our freehold agreement to a lease hold to open up the mortgages available. Has anyone gone through this before? What are the pros v cons? I’m being told it would cost about £2500 between us in legal fees. Is this correct. Any help/advice would really be appreciated.

Tom99

Just to be clear, you are in England and the three of you are joint owners of a freehold property which is divided into three flats? There are no leases?

How is your occupation of your particular flat documented?
Constructing three identical leases say 999yrs at £0 ground rent would not be particularly difficult but the problem will be all three of you need to agree plus maybe three mortgage co's as well including your existing mortgage co.
So possible 6 parties involved, £2,500 at least I would think.
That would still leave the three of you are joint owners of the freehold and you might want to consider converting that to a holding company with you each owning 1/3rd share in the company, extra cost.

Bowlsy1982

Thanks for your response Tom.
Yes I’m in England. We all have an equal share of the freehold with a deed of covenant in place. No leases are currently involved.

Of the 3 of us myself and one other who is mortgage free are for the idea. The third wants some information on the pros and cons as they had a bad experience selling a previous flat. I’ve got a call set up with the leasehold advisory service next week to go through the pros and cons.

Would we have to set up a holding company? What would be the benefits of this? Would it make it more complicated when we come to sell?

Thanks

Rob

SmashedAvacado

the benefits of having a company and owning a share in that company is that when you are selling you can sell the share that you own. If you jointly own the freehold, you easily can't sell your interest without involving the other owners.

Setting up a company is worth doing, and ideally the buildings insurance would be in the name of the company and the leaseholders would be noted. you would procure maintenance of the building via the company and recover a fair proportion from each of you.

Your arrangement is unusual and regularising will make any sale or refinancing a lot easier.

the others shoudl be able to get their lenders on board with this - the lender will want its fees paid too.