Shared ownership – can this be done on leasehold flat?

Shared ownership – can this be done on leasehold flat?

10:35 AM, 20th February 2013, About 11 years ago 4

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Shared ownershipI own a 5 year old two bed flat. It was not bought as a business venture but as a student property for my daughter and friends with a 95% LTV mortgage. I currently let it out as an independent studio and a 1 bed flat.

If I tried to sell the flat I may need to convert it back to a 2 bed and will then only get the original purchase price. I believe the overall floorspace of the flat is too small to be converted into two new independent leases as it is only 56 square metres. The studio is around 20 square metres and the 1 bed is around 36 square metres.

My question is: can I sell a 50 or 60% share of a slightly inflated valuation, so I can reduce the interest rate on the remaining mortgage, receive some income on the retained share, and also help someone get on the property ladder?

Although I did not buy this property for business purposes I would like to make the most of the asset but don’t really want to wait any longer than this summer for property prices to improve further.

I have seen homes advertised as shared ownership before and would like to do the same but before I seek legal advice I would like to hear if anyone has had experience or has knowledge of shared ownership and the pitfalls or advantages?

Margaret London

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Mark Alexander - Founder of Property118

7:41 AM, 20th February 2013, About 11 years ago

Hi Margaret

Sorry but I think you are flogging a dead horse here.

If the property is on a single title then your mortgage company will want to be repaid in full even if your freeholder were to allow the leasehold to be split to create two separate titles and I doubt very much that will happen anyway.

Presumably you have already sought permission to let the property from your mortgage lender and sought advice on whether building regs were required for the conversion work you have had done?

At best I think retaining this property as a long term investment as a rental property may be your best option.

Annette Stone

9:02 AM, 20th February 2013, About 11 years ago

Mark is absolutely right but the issue goes further than that and I am fairly certain that your lease on a two bedroomed flat would have prevented you to converting it into two independent units. You are probably in breach of your lease right now as well as in breach of all sorts of health and safety stuff relating to safety within flat. If I were you I would get the flat converted back to one unit a.s.a.p. hopefully without the freeholder finding out what you have been doing.

Freda Blogs

8:37 AM, 21st February 2013, About 11 years ago

Shared ownership is a very different concept from what you describe here, usually in schemes promoted by Housing Asssociations and sometimes Local Authorities, as one of a range of social housing solutions. They are designated as such within the planning consent and associated s106 legal Agreement.

As has been said, your proposal would be in breach of planning regulations, building regulations, your lease, your mortgage and doubtless other standards. Any legitimate solicitor would advise against this course of action and would likely refuse to act. If s/he agreed to draft an agreement (dodgy solicitor?), to be done properly to articulate and protect the 'rights' of the parties would require quite a complex agreement which would be costly. An inadequate agreement could entangle you so much that you would be in an even worse situation and possibly preclude a sale.

Please don't take this plan any further - it really is not a good idea!

0:39 AM, 22nd February 2013, About 11 years ago

Thank you for the advice. I am so glad I asked. I had no idea of all the implications. I will definitely take notice and revert to the original 2 bed format and sell up during the summer.

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