Buying the Freehold is it silly or impossible?

Just from a finance perspective it can make it more difficult to find a BTL lender if you own the Freehold as well.

Thank you Neil for your reply.
Can i ask why lenders will hesitate to lend if i also owned the free hold?

Thanks
Mizanur

One of the reasons is that they perceive it as extra risk if something happens to you and you own both.

This is just one factor though and I am not making a statement on whether it is silly or impossible.

The Leasehold Advisory Service (LEASE) has a wealth of advice on enfranchisement, http://www.lease-advice.org/publications/documents/document.asp?item=11.

Why not try to buy the lease as a commonhold, or at least put it into a company of which all the leaseholders (or the majority) are equal shareholders?

Alternatively if you have a majority of the flats then form a Right To Manage Company (RTM) which puts the leaseholders in control.

You cannot legally be freeholder and leaseholder in the same names, as you can't grant yourself a lease, as you are the same legal entity. However there are ways round it, e.g. put one or other in joint names with your spouse or partner, put the freehold in a company etc. I have this problem and ended up buying a flat cash. Only specialist lenders will do it and then of course you don't necessarily get the best rates.

You don't say how many flats in the block which might have a bearing, whether the freeholder occupies one of them would also have a bearing.

If there are only three flats maybe you could buy the whole property including the freehold. Again you would need a specialist lender and conveyancer.

Reply to the comment left by "Puzzler " at "07/07/2015 - 15:38":

The leases have already been granted so there's no need to go down the LTD company route. Contrary to what was advised above, most BTL lenders won't have a problem with you also owning the freehold, but some may not wish to do mortgages on all three units as many have maximum exposure levels within the same development. Once you own all three properties you have a right to buy the freehold and there is a prescribed formula for working out its cost which is determined to a great degree by the outstanding term left on the "long" leases. However, there doesn't appear to be much scope for any investment opportunity within your plan, as the main scope for profit comes when the leases run down and you're asked as freeholder to renew them. If you also own the leases then it'll only be you who is paying the extension costs!

This is a block with 10 flats and 3 of the flats are also up for sale, i believe these 3 leases belong to one person, i am looking into this as a rental investment hoping to purchase the free hold too.

Thanks
Mizanur

No, you don't need a limited company but you do need different names at some point. There are lenders I believe but I had this problem and it was very difficult and I ended up buying cash on a leasehold flat wherein I am already the freehold owner.

I don't understand your comment that once three are owned the OP can buy the freehold? S/he would have to consult the other leaseholders of which we now know there are up to 10 in total. Also above two do not count - I'm not sure if they don't count at all or just the ones over two, there are other threads about this.

How long are the remaining leases?

The remaining leases are 90 years on all, 3 flats are already up for sale.
Thought of buying the free hold and then these three flats and try and purchase the remaining flats over time hopefully if they do start
Selling.
If your the free holder of a block and and these lease holder say for example a flat, does the lease still need extending from yourself? If that makes any sense...

You could issue a new lease or extend it yourself but not if both are in identical names. You can't form a contract with yourself. The way round it is to put one or the other in joint names e.g. with your spouse or partner (the freehold will at this time have negligible value so better that is in joint names). Of course if you don't have a mortgage it doesn't matter - I have a 75 year lease and already owned the freehold and bought cash because of the difficulty of finding a lender. And it wasn't because the lease is only 75 years. If I was to remortgage I would have to put the freehold in joint names with someone else as it is not worth the cost of forming a company.

I'm a bit puzzled as to why you want to buy the freehold first? It's unlikely you have any leverage unless you own at least one flat and/or know the owner wants to sell it. With 90 years remaining it has little value on its own.