Let to Buy condition on not being Freeholder?

Let to Buy condition on not being Freeholder?

11:24 AM, 28th January 2022, About 4 months ago 9

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We have Let to Buy (LTB) mortgage offers, but they are conditional on the freehold not being held in my name. How can we get past this with minimal tax implications and expense?

Time is of the essence as we have a new build we are due to exchange on very, very soon.

The freehold is unencumbered, but the flat has an existing mortgage. We were thinking of gifting the freehold to a friend, which sorts the immediate issue but has implications for him regarding the rent coming in from the shop.

The main issue with that is getting the property back whilst we still have an LTB freehold restriction.

Many thanks

Simon



Comments

by Helen

12:16 PM, 28th January 2022, About 4 months ago

I had a similar problem with the last mortgage round and was trying to find a solution so I am interested in replies. In the end my broker found a lender which did not have such a restriction so they are out there but perhaps not at the lowest rates. However, the cost of changing the Freehold position would have cost more, as I would have had to set up a company.

by Smartermind

12:19 PM, 28th January 2022, About 4 months ago

Helen has your Solution. Set up a limited company and put the freehold in the company's name. That way you are not dependent on the whims of a friend.

Takes 2 minutes and £20 to set up a limited company on companies house.

by NewYorkie

12:36 PM, 28th January 2022, About 4 months ago

Reply to the comment left by Smartermind at 28/01/2022 - 12:19
Interesting approach. Could that be a way to avoid 'owning' a property which could be assessed care fees, or is that too simple?

by Helen

12:41 PM, 28th January 2022, About 4 months ago

I was confused about the remit of the Freehold Limited Company. Would all the Freehold costs and income go through it? Surely I would need to submit accounts for this company and incur extra accountants charges. In my case I own two of the three flats in the building, so when I submit fee accounts to the other flat owner (lessee) I need to make sure it is done properly.

by Simon

13:08 PM, 28th January 2022, About 4 months ago

Reply to the comment left by Smartermind at 28/01/2022 - 12:19
If I, or any member of my family, are the shareholder of the company, the mortgage offer would still be refused as though we were direct freeholders. Also, transferring the property to the company would mean STDT at the market value of the property.

by Kent Landlord

13:49 PM, 28th January 2022, About 4 months ago

We had a similar problem with Birmingham Midshires a few years back....btl mortgage in joint names on a leasehold flat where we owned all the flats and the freehold in joint names their solution was to put the freehold in my name only and the mortgage in joint names !! .... totally confused me why I assumed it was because the freeholder has more power than the mortgage company were there to be a possession order granted and perhaps my wife not being on the freehold gave the mortgage company some leverage ! but it was a quick solution to stumbling block and worked for us ....after the mortgage was in place my solicitor put the freehold back into joint names which I feel made a mockery of the whole process !!!! hope this helps

by Chris Bradley

15:54 PM, 28th January 2022, About 4 months ago

If you gift freehold to a "friend" the value of the freehold may attract stamp duty on transfer

Also wouldn't the freeholder be liable for collecting any lease money and doing accounts for building insurance and collecting maintenance from flat owners

by Helen

16:00 PM, 28th January 2022, About 4 months ago

The law is an ass as usual and the landlord is caught out yet again. It is better to be a freeholder as then we are not at the mercy of unscrupulous and dishonest managing agents for freeholders, but then it has suddenly got harder for freeholders to get BTL mortgages. By the way The Halifax don't seem to care about that and they are offering 5 BTL's now. I was fortunate to get 3 about 5 years ago. When I tried to increase it to 4 I was treated like a new client and couldn't get another one with them so had to go back to my broker.

by Puzzler

14:43 PM, 29th January 2022, About 4 months ago

Reply to the comment left by Kent Landlord at 28/01/2022 - 13:49
Nothing that complicated. It's because you can't have exactly the same title on the freehold and the leasehold because you can't have a contract with yourself, it's not a condition but it would be a legal nonsense and cannot happen. I did the exact same thing as you and put the freehold in joint names with a 99:1 split. Just watch out though, there are some lenders who require charge on the freehold as well if you are sole owner of both.


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