Is Leaseholder or Freeholder owner of property?

by Readers Question

10:20 AM, 16th February 2014
About 7 years ago

Is Leaseholder or Freeholder owner of property?

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Is Leaseholder or Freeholder owner of property?

I inherited a freehold building with two flats when my mother died. I wanted to draw finance from one of the flats for a deposit on another property. In order to do this I was told by my financial adviser to convert to leasehold. I asked my solicitor to do this for me with me being the freeholder and my husband the leaseholder, and a mortgage was obtained in my name. My solicitor though has made me the leaseholder and my husband the freeholder and his name is on the land registry title deeds. I told my solicitor the mortgage is in my name and he says this is ok. Is he right. Who now owns the property, me or my husband.

I am confused. Is Leaseholder or Freeholder owner of property?

Can anybody help me to understand this please?

Thanks

Christine


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Comments

Mark Alexander

10:33 AM, 16th February 2014
About 7 years ago

Hi Christine

You are certainly not the first and you will not be the last to find this confusing. However, from what you have said, your mortgage broker, mortgage lender and solicitor have done everything properly.

When you inherited the property you owned owned the rights of occupation and the the property itself. By creating leaseholds, the rights to occupy the property for an agreed term and on certain terms were created and separated from the freehold. These rights would all be in the lease.

It is these rights to occupy the property on the terms of the lease which you now own. These rights (the leases) have a value, just the same the same as when you buy a leasehold flat from a developer or anybody else for that matter. On that basis your mortgage is secured against the value of the lease.

Your husband now owns the building but because the rights to occupy that building have been sold on a long term lease the value of the building will have plummeted to a multiple of the value of the agreed ground rent, typically 20 times the annual ground rent = the value of the freehold interest. However, what you've lost on the value of the building you will have gained on the value of the leases. Often the combined value of the freehold interest (the bit your husband now owns) and the two leasehold interests (which you now own) will be greater than the value which you started with.

I hope that helps.
.

Christine Turner

15:45 PM, 16th February 2014
About 7 years ago

Reply to the comment left by "Mark Alexander" at "16/02/2014 - 10:33":

Thank you Mark, a weight off my mind, very confusing though.


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