How to sell two flats and the freehold?
I own a small detached freehold building which contains two self-contained flats, which I purchased eight years apart. I put both flats on the market last year, but failed to find buyers, so I re-let them.
The building is in a rural market town, and the local agent was worried that when I offered each flat with a share of the freehold, something which I would have thought was commonplace and an advantage, she was worried that it made the flats unmortgageable. As there would only be two owners, it would rely on them co-operating on things like the building insurance, and what happens if they don’t?
Ideally, I’d like one buyer to buy both, but that only seemed to attract bad offers from investors.
Yesterday I was approached by one of the tenants who would like to buy his flat, and I don’t know how to handle the freehold, something I definitely want to pass over. How would this normally be handled?
I know ‘ask your solicitor’ is the first answer, but he, being rural, doesn’t seem to know either.
Many thanks
John
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Member Since October 2022 - Comments: 410
10:55 PM, 23rd January 2026, About 3 months ago
So think about taxation-
1. Mgt company (RMC) holds the freehold as trustee on bare trust
2. Mgt company (RMC) owns the freehold for the beneficiaries registered on Leaseholders titles
So sale of lease with share in freehold is
1. Part disposal of freehold (1 above) by individual leaseholders as parties to the arrangement is a gain subject to CGT
2. Part disposal in (2 above) as a gain chargeable to corporation tax
Member Since November 2022 - Comments: 120
8:07 AM, 24th January 2026, About 3 months ago
Reply to the comment left by Neil Patterson at 23/01/2026 – 10:07
“Granting yourself a lease” is a legal impossibility. You need to transfer the freehold to eg a management co before (or simultaneously with) granting the long leases “to yourself”.
Member Since February 2025 - Comments: 69
8:45 AM, 24th January 2026, About 3 months ago
Reply to the comment left by Kizzie at 23/01/2026 – 22:55
Once long leases of the two flats have been granted at peppercorn rents, there should be no value left in the freehold for corporation tax purposes, and no gain in value for CGT purposes.
Member Since October 2022 - Comments: 410
9:12 AM, 24th January 2026, About 3 months ago
Taxation arises when the two leaseholders of the Management company holding a share in the freehold interest and the two different ways the freehold interest might be set up.
The leaseholders ownership will have separately registered titles at the LR. The two leaseholders will sell the remaining years on their lease at some point with their share
in the freehold.
At that stage depending on how the freehold is held will either attract CGT on the gain payable by the leaseholder seller or corporation tax liability on any gains if the seller of the lease with share of freehold interest is the management co.
Member Since April 2020 - Comments: 96
11:37 AM, 24th January 2026, About 3 months ago
Reply to the comment left by Neil Patterson at 23/01/2026 – 10:07
Would this work if the building contains, in addition to three self contained flats, a small shop, currently financed as semi-commercial ?
Member Since October 2022 - Comments: 410
12:36 PM, 24th January 2026, About 3 months ago
Legal advice should be obtained from law firms clearly specialising in property law, not a forum like this.
Property law which involves trusts is complex