Title split for house redevelopment?

by Readers Question

13:32 PM, 1st September 2020
About 3 weeks ago

Title split for house redevelopment?

Make Text Bigger
Title split for house redevelopment?

I am after some advice, please. I am currently in the process of redeveloping a four-storey house that was already converted into four separate apartments, but is all under one title.

The project is almost complete, and we are trying to refinance.

We are having difficulty splitting the titles for the purpose of refinancing.

Can anyone give me advice on the best way to achieve this!

We intend to rent out the four apartments.

Many thanks.

Andy



Comments

Neil Patterson

13:37 PM, 1st September 2020
About 3 weeks ago

Hi Andy,

Splitting all the (assuming) self-contained flats into separate leasehold titles would normally give you the most flexibilty, becaise you can then sell them individually if you wish and lenders are normally ok to lend on BTL for a leasehold flat. Although they will have exposure limits on a building so you may find you have to use more than one lender depending on the number of flats involved.

However, some BTL lenders will consider lending on a whole building with normally up to 4 self-contained flats. Beyond this number and for one freehold you are looking at more specialist commercial lenders at an increased cost.

Ian Narbeth

16:03 PM, 1st September 2020
About 3 weeks ago

Hi Andy
Unless the freehold is held by a company and you grant leases to a group company so that relief from Stamp Duty Land Tax can be obtained it is likely to be costly to split the title. You cannot grant leases to yourself. You also need to avoid granting leases for nil or a small premium as that creates transactions at an undervalue which in turn creates problems for lenders and purchasers.

Your best option is to mortgage the whole freehold on the basis that the loan will be repaid out of sales of individual leases to end buyers.

Andrew Stacey

17:21 PM, 1st September 2020
About 3 weeks ago

Reply to the comment left by Neil Patterson at 01/09/2020 - 13:37
Thanks Neil.

Andrew Stacey

17:22 PM, 1st September 2020
About 3 weeks ago

Reply to the comment left by Ian Narbeth at 01/09/2020 - 16:03
Thanks Ian

Laura Delow

9:49 AM, 2nd September 2020
About 3 weeks ago

Having recently placed this mortgage borrowing type for 2 clients, the lenders who quickly come to mind who lend on Multi unit properties up to 4 flats in one building are:-
Fleet (up to 10 units per property)
Precise (up to 6 units per property
Barclays (all individual units are fully self-contained, each must be let on individual AST's, or other acceptable letting basis up to a maximum of six self-contained units, of which a maximum of 2 studio flats are acceptable

Paragon (up to 20 units per property)
Clydesdale (up to 4 units per property)
There are then less well known lenders like Monmouthshire Building Society & others like them.
I hope this steers you in the right direction.

JohnCaversham

10:00 AM, 2nd September 2020
About 3 weeks ago

Hi Andy-when you say problems could you elaborate, we have done this to good effect a number of times so may be able to give a pointer?

Andrew Stacey

10:35 AM, 2nd September 2020
About 3 weeks ago

Reply to the comment left by JohnCaversham at 02/09/2020 - 10:00
The problem we are having is having the ownership of the building as a limited company and trying to split into leases with the same company ownership. This can't be done. As mentioned by a previous response above, a group company may be the answer. I think selling them may be the way forward!

Andrew Stacey

10:36 AM, 2nd September 2020
About 3 weeks ago

Reply to the comment left by Laura Delow at 02/09/2020 - 09:49
Thanks Laura

Ian Narbeth

11:05 AM, 2nd September 2020
About 3 weeks ago

Reply to the comment left by Andrew Stacey at 02/09/2020 - 10:35Hi Andy
As the freehold is held by a company the "lease to a group company" route is comparatively straightforward and I have done it. You need to put in place properly crafted leases that can then be assigned to end buyers later. The lender can take security from the group company over all the leases.

Kate Mellor

11:23 AM, 2nd September 2020
About 3 weeks ago

Reply to the comment left by Andrew Stacey at 02/09/2020 - 10:35
Do you currently have a mortgage secured on the freehold property? If so, you will need to look for a single lender for the leaseholds as you will have trouble peeling out the apartments from the freehold-if your lender agrees at all.

We did this a few years ago following the crash when YB pulled out of business lending in the property sector. At that time we had to go with several different lenders with varying policies. Things are easier now and you should be able to find a single lender for the lot. Paragon is very good, and while not THE cheapest offers a lot of flexibility. If you have a good mortgage introducer they can smooth the way a good deal by discussing individual cases with the decision makers.

Another advantage with a single lender is a single solicitor and the ability to complete on the entire deal on the same day.

You need to establish in advance that any new lender will agree to allow you to register the leases concurrently with completion. We had one lender who insisted the lease was registered prior to completion which meant we had to obtain alternative finance to repay the balance of the existing lending and release the property to enable us to register the lease and only then could we complete on the new mortgage. We did not discover this until a late stage and so had to apply for an extension on the mortgage.
I would also strongly suggest that you have the leases drawn up ready to register prior to applying for your new lending as it can take some time.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

My goals for Property118 in 2021

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More