Freehold property subject to a leasehold on the basement flat

ordnancesurvey84

The fixed rate on our Halifax mortgage is coming to and end next year, so we were just thinking about options when it comes to finding a new deal.

We have a bit of an unusual setup. Our building is essentially a semi-detached house with a basement flat which has its own separate entrance. We own the freehold for the entire building – but this is subject to there being a long lease on the basement flat. There is no leasehold title for the rest of the building which we live in.

This is not a so-called “freehold flat” in which there is more than one freeholder who cannot easily enforce maintenance obligations upon the other due to the absence of leasehold contracts, as we own the freehold to the entire building.

Halifax were happy to lend to us, as per their comments in the lenders handbook question 5.8.1 https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/2056/

I’m just struggling to understand the requirements of some of the other lenders in the list, as some of the lenders seem to require there to exist a leasehold title on the flat occupied by the freeholder.

To pick one example at random, Bank of China says:

“Yes, providing all flats in the block are subject to long leases, including the flat the borrower is to own and/or occupy but if the Borrower is the sole Freeholder, we also require a charge over the Freehold title.”

Have I understood this correctly? Are some lenders requiring there to be a leasehold title on the flat occupied by the freeholder? Is this even possible to setup? I thought it wasn’t possible to enter into a leasehold contract with oneself. Also, what’s the rationale here? How would doing so give the lender more confidence in the value of their security?

user1977

ordnancesurvey84 said:

I thought it wasn’t possible to enter into a leasehold contract with oneself.

It isn't, you'd need to do something like transfer the freehold into a limited company and then grant a lease to yourself as an individual. No idea about the rationale for lenders' concerns!

BonaDea

This sounds in its bones more like a 'coach house' setup albeit your house is over another flat rather than a leasehold garage.  Lenders do lend on properties like this.  Why not just go through an experienced mortgage broker?  They'll have come across this structure of tenure before.

ordnancesurvey84

BonaDea said:

This sounds in its bones more like a 'coach house' setup albeit your house is over another flat rather than a leasehold garage.  Lenders do lend on properties like this.  Why not just go through an experienced mortgage broker?  They'll have come across this structure of tenure before.

Yes we could do - and may well do especially as we're both now self-employed. We didn't use a broker when we initially bought the house - we approached Halifax directly as they offered one of the best rates at the time, and getting a mortgage was thankfully straightforward.
So I was just going through the MSE best buy list and cross-referencing it with the different lenders' answers to Question 5.8.1 to see which ones would be happy to lend. That was when I noticed that several lenders require a leasehold in addition to the freehold which is what I'm trying to get my head around!
Hmmm I haven't heard of a coach house before - I'll have a google - thank you

sammyjammy

It something that is built above either an access road or other peoples garages to maximise profits for builders!