Strange flat freehold situation...

rlkk

Looking for some advice from people who understand freehold/share of freehold/leasehold better than I do.

I have found a flat I want to buy. It’s in a building that’s split into two properties: the ground floor flat and a maisonette above. The vendor also owns the freehold for the whole building. The maisonette is owned by someone else, leasehold. The flat is being advertised with a (presumably 50%?) share of the freehold. I’ve been informed that, once it’s sold, the owner of the maisonette will be offered the other 50%. All good so far.

The problem is that there is currently no lease on the ground floor flat. Can someone please explain to me, in simple terms, what this means for me and what my options are? I will need a mortgage, which I understand can be difficult with a freehold flat? There was some talk of a new lease being drawn up. When should this be done? Before completion? Before exchange? Before I even make an offer? Or should I just walk away completely?

Thanks for reading. I hope I’ve explained everything okay; this is new to me but I’m trying really hard to get my head around it. Happy to be corrected if I’ve got the wrong end of the stick!

davidmcn

The vendor will grant you a new lease (which will be agreed before exchange), and will also sell you a 50% share of the freehold. You offer on the basis that you're buying a leasehold flat with a share of freehold. Has anyone mentioned what the terms of the lease will be?

da_rule

If the owner of the top floor flat declines to buy a share of the freehold then you would just buy the entirety of the freehold and the lack of lease won’t matter.

rlkk

Thanks, davidmcn.

The EA says that the new lease will be 125 years. However, I’m a bit reluctant to make an offer before I know what else the lease will say. I’d like the option to change the flat’s layout at some point and don’t want to be restricted by the terms of the lease. If it said I wasn’t allowed to e.g. move (non-structural) walls, that might be a dealbreaker. Am I being overly cautious, or should I insist on seeing the new lease before making an offer?

rlkk

Thanks for replying, da_rule.

If I bought the whole freehold (which I’m not sure I’d want to do!), would that make it difficult to get a mortgage?

da_rule

rlkk wrote: »

Thanks for replying, da_rule.

If I bought the whole freehold (which I’m not sure I’d want to do!), would that make it difficult to get a mortgage?

Not overly, it would just be a freehold subject to a leasehold interest.

If the upstairs flat declines to buy a share of the freehold then you won’t really have much of a choice, as the seller won’t want to retain any share of it (and if they did, that would then make the mortgage situation very hard).

da_rule

rlkk wrote: »

Thanks, davidmcn.

The EA says that the new lease will be 125 years. However, I’m a bit reluctant to make an offer before I know what else the lease will say. I’d like the option to change the flat’s layout at some point and don’t want to be restricted by the terms of the lease. If it said I wasn’t allowed to e.g. move (non-structural) walls, that might be a dealbreaker. Am I being overly cautious, or should I insist on seeing the new lease before making an offer?

You can always ask for the proposed heads of terms for the new lease before making an offer.

The situation with the upstairs flat needs to be sorted (and should’ve been sorted before the property was marketed), as you need to know whether you’re buying a freehold or leasehold interest and what the terms of the lease will be, before you can start getting a mortgage provider on board.

rlkk

da_rule wrote: »

Not overly, it would just be a freehold subject to a leasehold interest.

If the upstairs flat declines to buy a share of the freehold then you won’t really have much of a choice, as the seller won’t want to retain any share of it (and if they did, that would then make the mortgage situation very hard).

Sorry for yet another question, but why would the mortgage situation be hard if the vendor retained 50% of the freehold?

da_rule

rlkk wrote: »

Sorry for yet another question, but why would the mortgage situation be hard if the vendor retained 50% of the freehold?

Because you would then be joint owners.

It wouldn’t be overly problematic if you were granted a lease, but without a lease it would be difficult.

Also, retaining the 50% would open the current owner up to liability for a block he no longer lives in and may also have tax implications for him.

rlkk

da_rule wrote: »

Because you would then be joint owners.

It wouldn’t be overly problematic if you were granted a lease, but without a lease it would be difficult.

Also, retaining the 50% would open the current owner up to liability for a block he no longer lives in and may also have tax implications for him.

That makes sense, thank you!

Tom99

If you end up owning the freehold either alone or as a joint owner you also need to look at the detail contained in the lease of the maisonette because you as freeholder will be responsible for performing the landlords covenants/responsibilities typically repairs and insurance and you would expect the lease to allow you to recover 50% of those costs from the maisonette lease owner.
The existing owner of the freehold may be planning maximise the price they might obtain from the maisonette owner by offering them a longer lease maybe on different terms to the current lease in which case you should insist it is identical to the new lease being created for your flat.
It's not a deal breaker but I would ask that the lease on your flat is for 999yrs with a peppercorn ground rent.