Selkirk Posted July 19, 2007 Report Share Posted July 19, 2007 Hi A friend of mine bought a flat two years ago her fixed rate mortgage is up at the end of the month and is finding it very difficult to get a new one. She has interest only @ 92% and will need to self cert income, all this I could explain but her current lender won't offer her a new deal as she now exceeds 90% LTV due to their charges I may add. The problem apprears to be that she owns the freehold. The property is a converted 3 bed semi, the upstairs is a self contained flat on a leasehold the down stairs is the remaining flat but it was never changed to leasehold. From what I understand it's called a part possession house but all the lenders see it as a freehold flat. I looked up the property on one of those Land Registry sites and it's listed as freehold but the survey which was carried out for the original mortgage says leasehold, that's a bit wierd. We've had to look at adverse lenders in the hope that we'll find one that takes on freehold flats, but it doesn't seem right to resort to this when her credit is A1. I said that it looks as though she may have to set up a management company for the freehold and have both flats on leasehold but don't know the costs or the correct way to go about it. Who then owns the freehold - is it now split between the two flats, do you have to see a soilcitor to set one up or can you use an existing company, what's the cost, does the leaseholder of the other flat have to agree it all. So many questions. Appreciate any views or advice. Thanks Selkirk Link to comment Share on other sites More sharing options...
plym77 Posted July 19, 2007 Report Share Posted July 19, 2007 normally one flat will hold the freehold of the other, thus both owners have leasehold flats and the freehold of the other flat. I do not know how much this would cost to do, but may be worth checking with the solicitor. The other flat may be interesting in owning a share of the freehold as they will then have some control over maintenance, annual rental charges (charged by freeholder) etc Link to comment Share on other sites More sharing options...
Selkirk Posted July 19, 2007 Author Report Share Posted July 19, 2007 Thank you for your reply. I have contacted the original solicitor and asked for a quote, interesting though, it may turn out then that the cost of setting up the leasehold and the management company could be covered by the leaseholder buying a share in the freehold. cheers Link to comment Share on other sites More sharing options...
Matthew Posted July 19, 2007 Report Share Posted July 19, 2007 Management companies are a waste of money IMO. Why is it needed on such a small building? I can't see why the setting up of the leasehold should cost much money at all, all you are doing is getting a lease drawn up, anyone done this before? Can't imagine it should be more than hundreds, rather than thousands. The freehold I would have thought would be worth much more, if the flat is worth £150,000 I would say that the share of freehold should cost at least 10,000. You have to remember that when a lease is down to say 80 years it is very difficult to sell and some freeholders can charge 20% of the value to make it back up to 100 years. How many years are left on the other flat which is leasehold? My dad went to a solicitor about increasing his lease as only has 30 years left on his lease. He was told it would cost around £160,000 to renew it, wow! It was only worth about £150,000 (with a full lease) at the time :-) Could be an opportunity to make some descent money! Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 19, 2007 Report Share Posted July 19, 2007 I had a similar situation when i bought back the lease of one of the flats over my shop - I was the freeholder of the building and then buying back the lease . Solicitor thought we may have a problem but "legally" even though I was the freeholder i was borrowing to purchase the lease...which apparently is okay. So although i am on now on "both" sides of the lease lender was happy and deal done - have done this exact same thing on 2 now. If client is freeholder then she is presumably freeholder of both flats so can borrow against the "whole building! " What is on the original Mortage details ------LH or FH ...? As for fees ..............................I have put up several posts recently on the "problems " they are about to cause and i mean BIG PROBLEMS ! My advice is to get the "2% problem" shifted onto a 0% credit card and then look at rates from original lender again(who is happy to lend on a "simple" basis) As i have previously stated -as IR rise, the fees will rise, as lenders fight for their lives to carry on lending. the fees are going to be sky high and cause much bigger problems than people have so far realised.................. We wait ......................we see.......................when people come off their 2/3 yr deals ................... Simon Link to comment Share on other sites More sharing options...
Selkirk Posted July 19, 2007 Author Report Share Posted July 19, 2007 I agree management companies can appear to be a waste of time, I called one today to see what it cost and their charges etc, they couldn’t even give me an idea over the phone and told me to put it in writing. I also phoned the solicitor this morning, the one who did the conveyancing originally, to ask the same question and how he managed firt time round, and called again this afternoon – still waiting for someone to come back. The girl owns the freehold to the property and lives in the downstairs flat, it comes with the garden and a garage unshared. The leased flat above has about 70 years remaining; my guess is that both flats are worth around 150k. She tells me it was originally converted from a 3 bed semi, own front door etc and the top part sold on a long lease. She was buying the downstairs flat and the vendor at the last minute said she didn't want the freehold so it came with it - but she has no lease. Don’t know what was on the original mortgage offer but the survey, she still had, was based on a leasehold flat, which ties in with the above. It appears then that the mortgage was based on a leasehold flat but the land registry show her address as a freehold flat. I looked up the lenders lending criteria on the net and it states they don’t lend on freehold flats. So I rang them up and spoke to a surveyor and he said the flat is not freehold but is classed as a ‘part possession house’ all a bit confusing. Thank you for your help. cheers Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 19, 2007 Report Share Posted July 19, 2007 Okay so as the sale was inclusive of the freehold presumably the former owner provided a copy of the lease issued on the first floor flat ...........identifying who is responsible for buildings maintenance etc...... As such the mortgage is against the asset, being the whole building, so could you not get away with exactly this " a mortgage against the building" as opposed to "they don’t lend on freehold flats" Maybe upstairs is interested in purchasing the free hold and then granting a lease back on ground floor !? then you kill 2 birds with one stone and get the flat mortgagable as leasehold and pocket some dosh to cover ridiculous se up fees plus some ??!!!!!!!!!! HMmmmmmmmmmmmmmmm!! Simon Link to comment Share on other sites More sharing options...
Selkirk Posted July 21, 2007 Author Report Share Posted July 21, 2007 Hi Yep, that appears to be the way to go. She is going to transfer the freehold to her dad and then her dad can grant her a lease on the flat. On that basis she can remortgage to a High Street lender but has to keep to a max 90% LTV. She's going to wait another day on the upstairs leasehold as it could get too complicated. Thank you very much for all your help and words of wisdom. cheers Link to comment Share on other sites More sharing options...
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