Who can a lease be assigned to?

[BuildersMate]

Hello, done some reading around this question and need one bit of clarification. Think I saw something on this site before but can't seem to find it!

Scenario: I have converted a house into two flats with 2 seperatae entrances, utilities, gardens etc. Originally house had a freehold mortgage in the name of me and a partner.

I now need to split the title and create leases.

Is it possible to leave the freehold in the name of a partner and me and then assign both leases to myself?

Please help as I'm hearing various different things!

[Lawcruncher]

You can actually only assign an existing lease.

When it comes to creating a new lease the only impossibility is that the landlord and tenant are identical. So, A cannot grant a lease to A; and A and B cannot grant a lease to A and B. However, A can grant a lease to A and B; and A and B can grant a lease to B.

Why do you want to grant leases?

[BuildersMate]

Thanks for the quick response.

I've been told by the mortgage company that I need to split the title and effectively split the mortgage so the original amount borrowed is split across each flat. Both flats are on rent and I need to set up a buy to let mortgage on each

I want to own the freehold with my partner and then assign the lease for each flat to myself - from what you wrote, this should be possible? Reason also for creating the leases is so I can borrow more against each flat and use the money for something else

What are your thoughts?

[Lawcruncher]

I've been told by the mortgage company that I need to split the title and effectively split the mortgage so the original amount borrowed is split across each flat. Both flats are on rent and I need to set up a buy to let mortgage on each

That makes no sense that I can see. How can it improve the mortgage company's security? It is either a case of the mortgage company not knowing what it is is doing or a case of churning to generate fees.

I want to own the freehold with my partner and then assign the lease for each flat to myself - from what you wrote, this should be possible? Reason also for creating the leases is so I can borrow more against each flat and use the money for something else

If as a matter of fact you can borrow more by mortgaging each flat separately then that does make sense.

[leaseholdanswers]

That makes no sense that I can see. How can it improve the mortgage company's security?

Ok....

If the lender has to repossess/sell, then it is far easier to sell two leasehold flats to either owner occupiers or individual BTL, as opposed to a house divided into flats. Accordingly the value will be higher.

I agree that it is perfectly possible to fund it without granting leases, and using a company as below might avoid the need to separate ownerships as lawcruncher has posted, but you might get better terms.

I suggest you discuss with it a solicitor who deal with property matters not just a conveyancer and get advice from a financial consultant not "dave" really Sanjeet, from the call centre.


I'd be careful though about the freehold and creation of leases and take tax advice to minimise your liability.

As freeholds can be valuable too, and bluntly A + B may fall out/fail to agree, I suggest the freehold be put into a simple company,with 2 shares, so that you can sell the freehold ( by selling the company) later without having to offer it to leaseholders.

But either way do make sure that you put into your declaration of trust partnership agreement or articles some form of mediation or arbitration in the event you disagree over something.

[pilman]

Good advice about a company owning the freehold, so that selling the company has some tax advantages over selling the freehold title.

But either way do make sure that you put into your declaration of trust partnership agreement or articles some form of mediation or arbitration in the event you disagree over something.

As an example use the Accountant for financial disagreements or the solicitor for legal disagreements.
I was lucky not to need either, but my fellow director and I who owned 50% shares each, had that agreement written into the Memorandum for the company.
Hindsight is a great gift, as is using other people's experiences, which this web-site often imparts on posters.