Small developers and land owners often find that banks and building societies are only prepared to lend on titles with separate leasehold titles. So how do you achieve this?
If you have developed your own freehold property into two or more flats you may think it is easy to obtain mortgage funding on your new properties.
This is often not the case despite the fact you have obtained planning permission, physically divided the property into flats, completed the conversion works and obtained a building regulations completion certificate. This is usually because the arrangement on the title deeds don't match the lenders requirements because they will not lend on 'freehold flats'.
To fix this a solicitor is required to draw up a new lease for each of the flats which needs to be registered at Land Registry. This is a complex document as it needs to comply with the lenders requirements, typically following the Council of Mortgage Lenders instruction for leasehold property, and be fully marketable and saleable in the future as an independent unit.
Also it has to be acceptable to the Land Registry – the biggest issue is that you need to ensure that the lease is accompanied by a 'Compliant Plan' showing the exact floor plan of the flat (the Land Registry may inspect to check this). If you used architects or planning consultants to prepare the planning documents they may well be able to produce this for you otherwise you will need to employ a surveyor or specialist company e.g. http://www.wrightmansplans.co.uk to do this. A compliant plan should be to scale, show a north point and typically be 1/250 to 1/500 scale but the list of actual requirements is long – see further below. This is why a professional drawing is required.
You will also need to carefully consider the maintenance and insurance obligations for the building - this may depend on your long term plans for the flats and the size of the building. In addition the rights of way parking and communal arrangements need to be correct. All of this will need documenting in the leases.
We are able to assist you in providing this service for a fixed price. Typically the cost is around £500 plus VAT per flat where there are two flats in the building. This will normally reduce due to economies of scale for larger units.
As well as providing legal drafting we will also advise you on maximising the value of the property as a whole by creating value in the freehold interest in the long term for example by using escalating ground rent provisions and shorter leases. Typically the value of the freehold should be around £6-7000 for a building with two flats. This will increase according to the number of flats in the building e.g. a building with 4 flats should have a freehold value of £12,000 or so following the grant of the leases. This freehold interest can be sold separately in the future as there is a strong market for such investments. This is an area of added value which we bring to our clients in many transactions and this more that offsets the fees we charge.
For further help and assistance or a quote please contact Mark Sadler 01708 757575 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Checklist of documents required for new lease and refinance:
- Copy planning permission for the development.
- Copy building regulations completion certificate.
- NHBC (or equivalent) if required (some lenders require this even for conversions).
- Three sets of plans (or electronic PDF copy) showing flats as per Land Registry requirements (as specified below).
- Copy block insurance policy.
Where a plan is required for any new deed or for any application lodged at Land Registry, it should be prepared having regard to the following guidelines.
- Drawn to and show its actual scale.
- Show its orientation (for example, a north point).
- Use preferred scales of 1/1250 – 1/500 for urban properties.
- Use preferred scales of 1/2500 for rural properties (fields and farms etc).
- Do not base on a scale of imperial measurement (for example 16 feet to 1 inch).
- Do not reduce in scale (see section 6.6 Plans reduced in scale).
- Do not mark or refer to as being for identification only.
- Do not show statements of disclaimer used under Property Misdescriptions Act 1991.
- Show sufficient detail to be identified on the Ordnance Survey map.
- Show its general location by showing roads, road junctions or other landmarks.
- Show the land of the property including any garage or garden ground.
- Show buildings in their correct (or intended) position.
- Show access drives or pathways if they form part of property boundaries.
- Show the land and property clearly (for example by edging, colouring or hatching).
- Have edgings of a thickness that do not obscure any other detail.
- Show separate parts by suitable plan markings (house, parking space, dustbin space).
- Identify different floor levels (where appropriate).
- Show intricate boundaries with a larger scale or inset plan.
- Show measurements in metric units only, to two decimal places.
- Show undefined boundaries accurately and where necessary, by reference to measurements.
- Show measurements that correspond, so far as possible, to scaled measurements.
Keywords: Splitting the title into flats Splitting a freehold house Dividing a house into flats
