Freehold flat

[noflyingducks]

Hi,

I've seen a maisonette flat for sale that is listed as freehold. The flat I'm interested in is on the first and second floor, there is one other flat on the ground floor of the building. It is a house that has been converted into two flats. I believe, but am not entirely sure, that the ground floor is leasehold.

Are there any implications to this? Am I correct in thinking mortgage lenders don't like lending on freehold flats as you don't own the entire building?

Would appreciate any advice on this as I've never owned a flat before. Many thanks.

Bump

Quite possibly, the maisonette you are looking at comes with the freehold on purchase. The other one may be leasehold that you would be the freeholder of and be responsible for collecting ground rent, arranging buildings insurance and maintenance.

Best way to buy a flat imo!

Oh and mortgage lenders are much happier with a freehold than a leasehold!

@OldTinHat
Thankyou for replying!
When you say I could potentially be responsible for the ground rent/maintenance of the ground floor leasehold, what could be the problems of this, if any? It sounds like it could be an issue if the other seller isn't approachable? Can it affect the mortgage in any way?
Thankyou again.

It is possible to get flats where each flat is its own freehold - it's not common. You need to check the status of the other flat. If it's a separate freehold then I'd avoid - the reason is that it's hard to get a mortgage because it's hard to enforce any maintenance covenants.

The alternative is that you would own the freehold on the entire property and each flat would also have a separate lease. That puts you in a much stronger position. It would also be quite rare, but probably the best way to buy a flat. You'd probably be responsible for maintenance issues, and the lease would specify who's responsible for what share of the costs. You'd probably also have to do things like arrange insurance, but if you don't mind doing the property admin then it gives you much more control than you'd usually have.

The more usual situation is to have an external freeholder (usually) responsible for maintenance etc. and to whom you all answer. Or for the freehold to be in shared ownership where you each own an equal share of the freehold - the maintenance/management is often delegated to an external company, certainly if it's a large block. If it's small then maintenance may just be agreed ad hoc between the leaseholders. If there's no management company in that situation, then some lenders can be reluctant because it relies on everyone agreeing about everything.

Check the land registry to see the ownership/tenure of the different flats and whether one or more separate freeholds are also listed.

@CranfordScones
Thankyou for your help.

If I was the freeholder and the bottom flat was leasehold and I was responsible - is it simple arranging building insurance for the flat, or would I have to arrange any repairs, etc. What if the leasehold owner is not amenable to this, causes danage and isn't caring towards the problem - can this become a problem?
Sorry if these are basic questions, I'm struggling to not see it as a potential problem as I've only owned houses and only been responsible for our property.

Have you checked the exact situation with the agent? Share of freehold is very common and totally routine for mortgage lenders so I’d confirm whether they actually mean that rather than worrying too much about it at this point.

I haven't asked the agent yet, but land registry states the downstairs flat is leasehold and was recently sold as this.

Interesting.

Flats are more complicated than houses - that's just the way it is.

You'd need to see a copy of the other lease - which your solicitor would obtain during the purchase process. It probably states that the freeholder is responsible for maintaining and insuring the property, and it would specify what proportion of those costs (possibly 50%) that the leaseholder is responsible for paying to you. So, yes, the potential problem is that they're not approachable, or they're a buy-to-let investor who isn't resident/co-operative and/or they're generally hard to deal with.

You could make informal enquiries of the seller and ask him those questions through the agent. Also ask for details of any recent work on the property and whether any amounts are outstanding from the leaseholder. Your solicitor would ask those questions during the purchase process.

There may also be a lease on the flat you intend to buy - so you'd be freeholder of the overall property and leaseholder of your flat - I've lived in just such an arrangement. All of these smaller flat arrangements (typical conversions) depend on everyone co-operating nicely and no-one falling out. But they're very common and mostly lenders don't have a problem with them.

@CranfordScones
This is really helpful and informative. Thankyou for taking the time to explain all of this.

It is a good idea to ensure that there is a structure in place for paying for necessary works. I once had a share of freehold in a conversion and payment for maintenance and repairs was set out based on percentage per flat size. There was no management company, or way to enforce it though. I knew that one flat in particular would never have paid for anything. Legal action would have been expensive and not foster good neighbourly feeling. Luckily I didn't live there long enough for any major repairs to be needed.

Lenders aren’t keen on lending on flats over shops, or those with very high services charges. Perhaps that’s where the confusion comes in. They have said no to a lot of people with very high service charges over the last few years.

Oh, and length of lease. Under 80 years, forget it. Look for the longest lease possible. The closer it is to 80 years, they more they charge you to extend, so it pays to not leave it too close to that mark.

I would check with the agent first. In our recent property search we've come across flats listed as freehold which are actually share of freehold. So you end up a part of the management group as you own part of the freehold along with the other flat owners or third parties, but you are also a leaseholder.