Buying a maisonette and being given the freehold for the entire building

princeofpounds

hazyjo said:

Check responsibilities very carefully. Can expenses be claimed from owners? You don't want to find there's subsidence or it needs a new roof or windows etc and that's out of the freeholder's pocket.

Should be shared, but always tread carefully, especially if getting something for nothing.

Yeah on reflection it’s worth making sure this isn’t a ‘defective’ freehold In some way. It’s rare but if the leases are badly drafted it may leave some costs with the freeholder (insurance or building maintenance). Unfortunately I’m not convinced your lawyers are sufficiently capable or attentive to check this however, given their dismissive advice to date. 

I suspect however that the more likely scenario is that the departing owner is largely just using the freehold as an incentive to get the flat sold, but we can’t tell from here.

AdrianC

VU_2020 said:

...as I know that it is not acceptable to have my leasehold and the entire property freehold on my name.

Why on earth not?

You may wish to offer half-ownership of the freehold to the other leaseholder, or you may be happy taking responsibility just on yourself.

princeofpounds

I read conflicting information on the issue with owning freehold and leasehold in the same name. I think the legal issue issue is supposed to be that you cannot contract with yourself and so that creates a variety of problems. I also read that mortgage lenders often have issue with it because it can allow you to use your position as the freeholder to imperil the lease which is their security, as you would receive it back if forfeited. But finding something definitive that isn't behind a legal publishers paywall is proving a bit tricky.

davidmcn

princeofpounds said:

I read conflicting information on the issue with owning freehold and leasehold in the same name. I think the legal issue issue is supposed to be that you cannot contract with yourself and so that creates a variety of problems. I also read that mortgage lenders often have issue with it because it can allow you to use your position as the freeholder to imperil the lease which is their security, as you would receive it back if forfeited. But finding something definitive that isn't behind a legal publishers paywall is proving a bit tricky.

I know there's a difficulty with creating a new lease without the parties being different legal entities, but I don't think that prohibits the same party becoming both freeholder and leaseholder at a later point.
The CML Handbook doesn't suggest that lenders have a general problem with it:

"5.8.1 Unless we indicate to the contrary (see part 2), we have no objection to a security which comprises a building converted into not more than four flats where the borrower occupies one of those flats and the borrower or another flat owner also owns the freehold of the building and the other flats are subject to long leases.

5.8.2If the borrower occupying one of the flats also owns the freehold, we will require our security to be:

• the freehold of the whole building subject to the long leases of the other flats; and 
• any leasehold interest the borrower will have in the flat the borrower is to occupy."

Ditzy_Mitzy

AdrianC said:

VU_2020 said:

...as I know that it is not acceptable to have my leasehold and the entire property freehold on my name.

Why on earth not?

You may wish to offer half-ownership of the freehold to the other leaseholder, or you may be happy taking responsibility just on yourself.

For the first point, it's Rye v Rye (1962). One cannot grant a lease to oneself. At the point one becomes sole freeholder of property he has a leasehold interest in, the lease ceases to exist. In this case, however, it probably doesn't matter. One owns the freehold, lives in the first flat and leases the second to whoever occupies it. 
You may, if you wish, split the freehold in half. At that point, if the occupier of the second flat buys it, the second lease also ceases to exist and it becomes two freehold properties. The practicalities of that might be called into question, but I've seen it done with maisonettes (and nearly bought one years ago!). 

davidmcn

Ditzy_Mitzy said:

AdrianC said:

VU_2020 said:

...as I know that it is not acceptable to have my leasehold and the entire property freehold on my name.

Why on earth not?

You may wish to offer half-ownership of the freehold to the other leaseholder, or you may be happy taking responsibility just on yourself.

At the point one becomes sole freeholder of property he has a leasehold interest in, the lease ceases to exist. In this case, however, it probably doesn't matter. One owns the freehold, lives in the first flat and leases the second to whoever occupies it. 
You may, if you wish, split the freehold in half. At that point, if the occupier of the second flat buys it, the second lease also ceases to exist and it becomes two freehold properties. The practicalities of that might be called into question, but I've seen it done with maisonettes (and nearly bought one years ago!). 

In practice I don't think the lease is automatically extinguished, certainly the Land Registry take the view that you need to choose to do so:
https://www.gov.uk/government/publications/leases-determination/practice-guide-26-leases-determination#determination-on-merger