Freehold maisonette above a shop – mortgage nightmare?

by Readers Question

8:38 AM, 22nd October 2018
About 4 weeks ago

Freehold maisonette above a shop – mortgage nightmare?

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Freehold maisonette above a shop – mortgage nightmare?

I’m hoping that the well informed members of the forum will be able to help me with my problem below.

I unfortunately bought a freehold maisonette that resides over a flower shop below just over 2 years ago.

I own the freehold to the whole building with the shop owner owning a long lease below. The shop owner pays me £10 worth of ground rent per annum, there is no service charge as all costs are shared equally as they arise (including insurance). I was not advised by the mortgage broker or solicitor I used that this may create a problem for me in the future.

I’m in the process of remortgaging the property, but I am having a lot of trouble. I’ve been told that Barclays and Natwest usually take freehold maisonettes, but not with commercial units below. I’m currently with the Halifax but I do not want to stay on the Halifax renewal rates as the rates are not competitive at all.

Does anyone own a similar property and has managed to get a mortgage with a different lender?

I’m concerned that this will affect the resale value as if there is only one lender who will lend on these types of properties then the only purchaser could either be a cash buyer or only with a mortgage through the Halifax (unless this isn’t the case?!?).

Is there a cost effective way of selling the freehold to somebody else and I just have a long lease, as would be the norm? If this was achievable then it wouldn’t limit lending options as its leasehold and not freehold. Do I have any other options?

Thanking you in advance,

Henry



Comments

Neil Patterson

8:41 AM, 22nd October 2018
About 4 weeks ago

Hi Henry,

There will always be commercial lenders if the security, LTV and income is sufficient and will price accordingly.

Any property that is harder than standard to finance will to some extent limit demand and hence under market forces price.

I will ask one of the team to comment on this for us.

Howard Reuben CeMap CeRER

9:20 AM, 22nd October 2018
About 4 weeks ago

Hello Henry

The way you describe the property it will be deemed to be a 'semi commercial' property with you owning the whole freehold which includes part residential and part commercial.

If the resi part was also to have it's own lease (in the same way you say the shop has it's own lease), then you can remortgage the maisonette separately, and there will be many lenders on our residential mortgage panel who would be able to help you.

Alternatively leave the title 'as is', and we can then help you via the alternative route from our commercial mortgage lenders instead.

Contact us via my profile link anytime to discuss further. One way or the other, I can assure you the Halifax (albeit a great lender) is not the only one, based on the brief info you have told us about so far.

Howard

Justin Selig - solicitor

10:16 AM, 22nd October 2018
About 4 weeks ago

Dear Henry

As per Howard's response, you simply need to create a leasehold title for the maisonette and borrow against that - not the freehold. It is quite simple to do, you need to grant a long lease out of your freehold title - although you can't grant a lease to yourself, so you would need to grant the lease to a different person than the freeholder. So if you owned the freehold in your own name, you could grant the maisonette lease to yourself and your partner, or vice versa. Alternatively you could transfer the freehold into a limited company and grant the lease of the maisonette to yourself in your personal capacity.
Once you have done that, you should be able to borrow from most lenders.

Justin

BP Surrey

10:56 AM, 22nd October 2018
About 4 weeks ago

I agree with Justin's comment. I recently sold a leasehold flat owned by my wife and I with the freehold being in my name only. Your solicitor will be able to draw up a new lease for the flat and sort out who owns what in terms of the lease and freehold.

Lucie Wade

11:01 AM, 22nd October 2018
About 4 weeks ago

Hiya
Best and easiest way to do this is to transfer the freehold into a Ltd company so this makes it a separate legal entity then remortgage at will to anyone of numerous lenders. The lenders will differ depending on whether this is residential or buy to let. If resi then you can go back to to say Natwest - they're fine above commercial - we've just completed an almost identical scenario to yours. If buy to let then again you have plenty of lenders to chose from depending on what other commercial units are in the row. Some lenders avoid units with off license or any this that 'smells' e.g hairdressers, dry cleaners, take away, restaurants etc. So in Summary, no need to sell the freehold, just transfer to a ltd company in your name (and of course grant your self a lease from there) - any conveyancing solicitor can do this. Good luck

Ian Narbeth

12:17 PM, 22nd October 2018
About 4 weeks ago

Hi Justin
If you are moving the freehold about and granting a lease to yourself or such-like you need to watch out for SDLT and also to avoid accidentally creating a transaction at an undervalue (e.g. if you sell the freehold to your company for a pound that is an undervalue). which will cause additional problems. I suggest you take professional advice.

Justin Selig - solicitor

12:30 PM, 22nd October 2018
About 4 weeks ago

Hi Ian
There shouldn't be any SDLT implications, though there would be Land Registry Fees, which would be minimal.

Ian Narbeth

12:40 PM, 22nd October 2018
About 4 weeks ago

Reply to the comment left by Justin Selig at 22/10/2018 - 12:30
Dear Justin
I meant to address my earlier post to Henry. Apologies.
There might be SDLT implications. It depends on the value of the freehold. As this includes a valuable residential property, SDLT might come into play. Henry should take advice to avoid blundering into a problem.

David Mensah

11:26 AM, 29th October 2018
About 3 weeks ago

I had a similar situation to you a few years ago (slightly more complicated freehold) situation, above a hairdresser. Set up a leasehold and mortgaged it through Handelsbanken. I would contact them directly once you've sorted out the split as they don't tend to work much through brokers. Decisions are made locally, so no idea if your local branch does or does do flats above shops.


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