Ways around the title confusion of property divided in to flats
Q: I own a semi-detached house in London which is essentially converted into two flats.
I and my wife reside in the ground-floor flat and the first-floor flat is held on a leasehold title. The title to the house, grounds and our flat is freehold.
We are moving to Leeds with my employment and have agreed a sale of the property. However, the buyer’s conveyance states the freehold title status of our flat will not be acceptable to a lender for mortgage purposes. I have spoken with the conveyancer who acted when we bought some five years ago and they state the property is a freehold subject to the lease of the firstfloor flat and this is acceptable.
This is all very confusing to us – can you help to clarify the situation? A: The description of your freehold property is that of a ground-floor flat with grounds, being the drive and front and rear gardens. As the physical status of your property is essentially a flat, then the Council of Mortgage Lenders Handbook guidelines apply on this premise. Freehold flats are not usually accepted as security for mortgage purposes. Only certain exemptions are made when the freehold title contains rights and covenants similar to those usually set out in a lease.
Thus your buyer’s conveyancer is correct. The solution is to firstly create a lease of your ground-floor flat and grounds and base the sale contract around the granting of the new lease on completion. Secondly, a limited company should be formed to acquire the freehold immediately after the granting of the new lease. Your buyer and the owner of the first-floor flat lease take a 50 per cent share in the limited company. This will then put the flats on an equal legal footing and create a separate legal entity for the freehold title. Of course, this will all be at a cost but as you are relocating with your employment I take it you need to proceed quickly with your sale. However, you may be able to reclaim some, if not all, of the costs from your former conveyancers.
John Robson is residential conveyancing manager at Ford & Warren Solictors, Leeds.