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Aug, 2014

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  1. #1

    Default Can we mortgage one flat if we own whole freehold?

    I bought a top floor maisonette (leasehold) in 1995. In 2001 myself and my husband purchased the freehold and decided to live in the ground floor flat. We want to mortgage the freehold but have been advised by our solicitor that we are attempting to mortgage a “freehold flat” which is unacceptable to the Bank of Scotland. They have suggested that a lease is created for our flat and the mortgage be on this instead. Is this advice correct as it sounds costly?

    Any assistance is much appreciated.

  2. #2
    Join Date
    Sep 2006
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    Sheffield
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    Quote Originally Posted by Monkey2561 View Post
    I bought a top floor maisonette (leasehold) in 1995. In 2001 myself and my husband purchased the freehold and decided to live in the ground floor flat. We want to mortgage the freehold but have been advised by our solicitor that we are attempting to mortgage a “freehold flat” which is unacceptable to the Bank of Scotland. They have suggested that a lease is created for our flat and the mortgage be on this instead. Is this advice correct as it sounds costly?

    Any assistance is much appreciated.
    When you purchased f/r, what was done about the two leases? Were they both merged, or do they both exist?
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

  3. #3

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    Hi Jeffrey

    The property is a house converted into top and bottom flat (maisonettes). There is only one lease and that is for the top floor flat (which I own myself and intend to sale on). The Freehold deeds state that the freehold includes the bottom floor flat (our home). There is no lease for this flat.

    At present we need to mortgage in both mine and my husband's name (owners of the freehold) due to salary and therefore I don't see why the solicitor needs to create a lease for the bottom floor flat which they say can't be in our joint names anyway.

    Just to clarify, we own the freehold for the whole building/land (no.3) and live in the ground floor flat (which is also called no.3). The top floor flat is no 3a.
    Last edited by Monkey2561; 22-06-2008 at 13:21 PM. Reason: Additional Information

  4. #4
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    Quote Originally Posted by Monkey2561 View Post
    Hi Jeffrey

    The property is a house converted into top and bottom flat (maisonettes). There is only one lease and that is for the top floor flat (which I own myself and intend to sale on). The Freehold deeds state that the freehold includes the bottom floor flat (our home). There is no lease for this flat.

    At present we need to mortgage in both mine and my husband's name (owners of the freehold) due to salary and therefore I don't see why the solicitor needs to create a lease for the bottom floor flat which they say can't be in our joint names anyway.

    Just to clarify, we own the freehold for the whole building/land (no.3) and live in the ground floor flat (which is also called no.3). The top floor flat is no 3a.
    OK. So you can mortgage any of the following:
    1. Entire house as single freehold PLUS the upstairs lease.
    2. Upstairs lease only.
    3. Newly-to-be-created downstairs lease (NB: f/r must be in different permutation of names from leasehold, e.g. put f/r into sole name so he/she then grants lease to joint names).
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

  5. #5

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    Thank you so much Jeffrey. Out of interest, at present do I own what they call a "freehold flat"?

  6. #6
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    Quote Originally Posted by Monkey2561 View Post
    Thank you so much Jeffrey. Out of interest, at present do I own what they call a "freehold flat"?
    No. The "flying freehold" problem is where you own ONLY a freehold slice of building but don't own above and- more important- below it.

    As you do own the whole freehold, your upper flat is not a flying freehold even if you merge the lease (to leave a single whole-house freehold).
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

  7. #7

    Default

    For clarity, the option (number 1) about mortgaging the entire house, would Bank of Scotland's charge then be on both the freehold title and the existing top floor leasehold title?

  8. #8
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    Quote Originally Posted by Monkey2561 View Post
    For clarity, the option (number 1) about mortgaging the entire house, would Bank of Scotland's charge then be on both the freehold title and the existing top floor leasehold title?
    Yes, although it is effectively the same as merging the lease to produce a single title (freehold, not a reversion) for entire house.
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

  9. #9
    Join Date
    Apr 2006
    Location
    Hampshire
    Posts
    1,047

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    Solicitor who originally advised has not read the Council of Mortgage Lender's handbook - the relevant section with Bank of Scotland's views on the point in question is as follows:
    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
    However, there does seem to be confusion amongst solicitors etc on the point, and this does regrettably mean that you may end up creating a lease later in order to sell the flat without causing this unnecessary confusion, in favour of technically different people as explained by Jeffrey:

    (NB: f/r must be in different permutation of names from leasehold, e.g. put f/r into sole name so he/she then grants lease to joint names).
    RICHARD WEBSTER

    As a conveyancing solicitor I believe the information given in the post to be useful (provided it relates to property in England & Wales) but I accept no liability except to fee-paying clients.

  10. #10

    Smile

    Thank you both ever so much for your responses on this. Next time I will be coming straight to your firms!

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