Questions with an inherited property?

Questions with an inherited property?

10:50 AM, 20th September 2022, About 6 days ago 15

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Hi, I have inherited a property worth £900k with no mortgage. I am converting the house into two flats, I have planning permission and I plan to rent out both flats after the work.

I plan to get a development loan and after the work, I plan to get two individual buy to let mortgages.

I hear I need to make two leases for both flats.

My problem is as a freeholder I can’t have the freehold and leases in my name.

If I have one flat in my personal name and the other in a limited company, I think I will then be faced with stamp duty … if I sell to the limited company, and also stamp duty.

How do I solve this problem?

I only want to rent out the flats… can anybody help me to solve this please.

Oscar



Comments

Graham Bowcock View Profile

11:53 AM, 20th September 2022, About 6 days ago

Why do you need to create leases? Who has told you that and why?

Hedley

12:09 PM, 20th September 2022, About 6 days ago

Unless you intend to create long leases and sell the flats, there is no need to create anything other than Assured Shorthold tenancies and this will not attract stamp duty.

Smartermind

12:42 PM, 20th September 2022, About 6 days ago

Reply to the comment left by Graham Bowcock at 20/09/2022 - 11:53
Guessing here, but could the requirement for two leases be because the OP plans to split one freehold property into two flats and get two buy to let mortgages, one on each flat?

Oscar McMASTERS

13:13 PM, 20th September 2022, About 6 days ago

Hi, yes Graham, good guess...I don't want to live in the flats, I only plan to rent them both.
My understanding is that a freeholder cannot grant leases to himself...I plan to split the title & inform the land registry that I have converted the house into two separate flats.
I have been told that most mortgage companies will insist that the two flats have leases, in order for me to refinance the flats.

Anybody else can help...in the future I might sell the top flat in order to repay the mortgage, but that might be in 15 years or so.

Oscar.

DGM View Profile

13:28 PM, 20th September 2022, About 6 days ago

Put the Freehold in a ltd company, gives you lots of protection if things go wrong. You can then have the BTL in your name, mortgage companies don't like 2 flats in same block so you may ned to different mortgage providers.
You could put the BTL in a ltd co and the freehold in a different ltd co

Graham Bowcock View Profile

13:32 PM, 20th September 2022, About 6 days ago

My firm does loads of portfolio valuations for lenders and there is no issue (certainly with the ones we do) where a borrower owns a whole block of flats, however many there are in the block.

Creating leases is not without cost and complexity. Although you may be fully involved at the moment, the leases will need to be written to cover service charges and maintenance/management of communal areas.

Oscar McMASTERS

20:29 PM, 20th September 2022, About 6 days ago

Reply to the comment left by Graham Bowcock at 20/09/2022 - 13:32
Hi Graham, I have inherited this old property, I have a wonderful design by a architect, it's going to cost a he'll of a lot for a conversion renovation in London.
I only plan to rent both flats, my finance advisor, says that most High Street mortgage companies will not give you a buy to let unless the two flats are on leases.
I plan to rent for 1or 2 years at a time, after the conversion, I will hopefully have a property worth more than 1.5 million.
I also hear I need to tell the land registry about the conversion. For me this is a lot of money, so I'm just asking if it's possible to be a freeholder landlord with two separate leases ? much appreciated.

Oscar.

Graham Bowcock View Profile

8:26 AM, 21st September 2022, About 5 days ago

Reply to the comment left by Oscar McMASTERS at 20/09/2022 - 20:29
Hi Oscar

There are definitely lenders out there who will lend on the ownership you have (from what you have said). They may not be high street and may look at a commercial basis, so could be a bit dearer. however, the downside of splitting the title is the cost and inconvenience.

You don't need to tell the Land Registry about any conversion unless you split the Title.

It sounds like you need to secure some more formal advice.

Oscar McMASTERS

10:20 AM, 21st September 2022, About 5 days ago

Reply to the comment left by Graham Bowcock at 21/09/2022 - 08:26
Good morning Graham,

I have had advice from a couple of people, a accountant..a couple of property developers, but I'm hearing different things from everyone.

I have the property, I have full planning permission, the property has massive potential in west London, it will rent for more than 50k a year.

But I need to be careful, once I get the development loan, I will need to be able to pay it back, I am expecting the work to take 10 to 12 months .

The problem is I don't see anything about renting a conversion, I will have to sell when I'm a old man to pay back the mortgage...but I hope I can become a landlord and rent both for a few years.

I appreciate you helping me.
Kind regards
Oscar.

Oscar McMASTERS

10:21 AM, 21st September 2022, About 5 days ago

Good morning Graham,

I have had advice from a couple of people, a accountant..a couple of property developers, but I'm hearing different things from everyone.

I have the property, I have full planning permission, the property has massive potential in west London, it will rent for more than 50k a year.

But I need to be careful, once I get the development loan, I will need to be able to pay it back, I am expecting the work to take 10 to 12 months .

The problem is I don't see anything about renting a conversion, I will have to sell when I'm a old man to pay back the mortgage...but I hope I can become a landlord and rent both for a few years.

I appreciate you helping me.
Kind regards
Oscar.

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