Freehold Maisonette to buy or not to buy?

sandygreen

I have put in an offer on a one bedroom ground floor maisonette with own garden with own freehold. It says in the sales description: 'that the owner of this property owns the freehold for the ground floor and first floor flats'. These are purpose built maisonettes with their own front doors, one leading to the ground floor and the other the first floor. (There are no other flats above).
I would like to know if owning the freehold to both flats could be a drawback or an advantage? For example would the leasehold flat upstairs have to pay me ground rent or maintanance charges? Would I have to pay their buildings insurance or would I be able to claim that back. I also realise that some banks and building societies will not grant a mortgage.
Your thoughts are gratefully appreciated as well as any useful websites.

KiKi

Hi there

It can be an advantage and a drawback!

As the freeholder, you are responsible for buildings works, insurance - usually anything that involves a communal area, the roof and the building exterior.

As the owner of the maisonette, you will also have a lease...effectively you are a freeholder who is leasing to yourself, and the other two leaseholders who own the two flats. Those three leases will have amounts apportioned between them of who owes what for things like buildings work and insurance.

So, for eg, the maisonette might have to pay for 45%, and each flat 27.5%. Any work that is done, is apportioned in that way, and is paid to you as the freeholder. You pay yourself 45%, and the two other leaseholders pay you 27.5% each. You need to be crystal clear about what the freeholder is responsible for, and what the leaseholders are responsible for (eg, in some places, the window frames are the freeholder's responsibility, but the window panes are the leaseholders').

Yes, you can charge ground rent to the other two flats, it's usually a nominal amount of betweenm £25 and £100 a year. However, the leases may already specify what that ground rent is and how often it increases.

You can also charge the two leaseholders who own the flats as and when their leases need extending. Typically that cost might be between £2000 and £10000, depending on how long or short their leases are. If their leases are 125 years, they'll probably never have to do it. If their leases are 80 years, they'll probably need to extend them in the near future.

The other advantage is, of course, that you have control of the buildings costs so that they don't spiral! That's the advantage I enjoy the most, knowing I'm not being screwed over by an unscrupulous freeholder!

The drawback is that you are responsible for it. Mortgage companies seem to be much happier now about freehold purchases, so it shouldn't be an issue.

I am an equal freeholder in my property with two others. I manage all the finances, and I love it as I can ensure I'm not being screwed over! When anything needs doing, I let them know what quotes I have gotten, and we agree on who we want to do the work. I then tell them what they owe me; they pay me, and I get the work done. Works for me.

Doozergirl is your expert on this, but I hope this helps in the meantime.

KiKi

Norroy

I would agee with all of the above.If the loft space above the first floor flat has not been converted, and is not demised in the first floor lease, you will almost certainly own the loft space.This will mean that when someone does decide to convert it, you will be in line for a nice payout.These Edwardian maisonettes,make great buys. Owning the freehold would be the iceing on the cake.

sandygreen

Thanks for your answers. I would just like to point out that there are only two flats in question. One at the bottom and one at the top. (best described as one house with two doors to the front. The ground floor is one flat the upstairs the other. I would be living in the ground floor one.

sandygreen

I would just like to add that there are no communal areas

KiKi

The same principals still apply to what I wrote; just take out the other flat that I referred to.

KiKi

Doozergirl

You incur no costs as a freeholder - the leaseholders pay everything. So you have 'responsibility' for the upkeep of the structure, it's more making the practical decisions than it is paying for them! As long as you look after the place then any cost you bear will because you live in one of the maisonettes, not because you own the freehold, iyswim.

What you must read through yourself is the lease for the flat above and ask your solicitor for a full breakdown of what that means. It should detail, in full, all your obligations as freeholder and theirs as leasehold.

I see no downside to owning the full freehold. I'd rather own the full freehold then have to share it or be a leaseholder!

Richard_Webster

When you apply for your mortgage you need to make it clear that it is not a freehold flat as such, but one covered by paragraph 5.5.3 of the CML Lenders Handbook found at: http://www.cml.org.uk/handbook/frontpage.aspx

Other freehold arrangements
5.5.3 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.
5.5.3- Do you lend in these circumstances?

Yes


5.5.3.1 If the borrower occupying one of the flats also owns the freehold, we will require our security to be:
5.5.3.1.1 the freehold of the whole building subject to the long leases of the other flats; and
5.5.3.1.2 any leasehold interest the borrower will have in the flat the borrower is to occupy.
5.5.3.2 If another flat owner owns the freehold of the building, the borrower must have a leasehold interest in the flat the borrower is to occupy and our security must be the borrower's leasehold interest in such flat.
5.5.3.3 The leases of all the flats should contain appropriate covenants by the tenant of each flat to contribute towards the repair, maintenance and insurance of the building. The leases should also grant and reserve all necessary rights and easements. They should not contain any unduly onerous obligations on the landlord.

The "Yes" in red is the specific response of Nationwide BS. Most major lenders will accept this but Bradford & Bingley/Mortgage Express for some reason won't and HSBC doesn't subscribe to the CML handbook so they may well say "No".