Title split for house redevelopment?

@Ian Narbeth, 16:03 PM, 1st September 2020
Hi Ian,
My question is slightly off the main topic so hope no one minds me piggy backing.
It was to do with your comment in answer to the OP where you said –
“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.” –

Question- I am in process of applying for enfranchisement for our 2 bed flat where there are two flats in the freehold building. We hold one of the leases and the other flat owner holds the other. We were intending to set the new leases out at 999 years and the ground rent set at zero with no premium. By doing this are we in any way devaluing our property values as I had thought we were doing the opposite by obtaining enfranchisement?
In this situation the freehold will be a share and will be passed on with sale of each flat when sold and not able to split from said properties, thereby making the freehold non monetary value but instead it’s value will come from the control the leaseholders of each flat maintains as owners of said flats.
Any extra insightful information will be much appreciated.
Regards, Nathan

Hi Nathan
No, it’s different where the owners of the freehold grant themselves extended leases to replace existing leases. There is no significant transfer of value as you both own a share in the freehold and in effect the freehold is held beneficially for the two owners.

Contrast that with Company A granting a lease at an undervalue to Company B. If Company A subsequently becomes insolvent its liquidator could challenge the transaction as A has made a gift to B to the detriment of A’s creditors.

This is something we do all the time. Speak to Richard Spencer at Converse Law https://converselaw.com/richardspencersolicitor who will be able to sort out the leases as a ‘transfer’ between your two companies, with no SDLT payable.

Thanks to all for your help