Selling Leasehold and Retaining Freehold?

Interested in this too. But in a slightly different scenario: 50% share of freehold and 1 leasehold flat. Would it be worth just selling the leasehold on a new long lease and keeping the freehold and perhaps selling it to the other current joint freeholder?

It seems a leasehold flat and stare of the freehold could be putting some potential buyers for the flat off.

My experience as a conveyancer is that a leasehold title and share of freehold, specially if it is meaningful share of,say, 50% is always more desirable from the point of view of the purchaser

Freehold value depends upon a number of factors ... ground rent income ... the length of the unexpired lease terms and the market value of the flats ... is the freeholder responsible for management of the building ... does the freeholder insure and recover costs via service charge. You've not provided any of those factors, so it is not possible to accurately answer your question.

However, let's assume you going to create new leases. These would generally be for a term of 125 years from now. Ground rent would generally not be more than 0.1% of the market value of the flat - so a £200,000 flat would have a starting ground rent of £200 per annum. That ground rent would probably be reviewed every 10 years, by reference to Retail Price Index os similar. The landlord would normally insure and manage. That would currently produce a freehold value of 10x to 15x the total ground rent, on such a small block of flats.

Capital Gains Tax depends on a wider picture, not just the building. However, if you own the building personally (in your personal name) and you create leases where your Limited Company becomes the leaseholder (i.e. you personally own 100% of the shares), then arguably that is a transfer of property not a sale of property. That may produce no stamp duty -as there's no 'sale'. That may also produce no capital gain - as the value of the flats equals the value of the shares/company ... and your left hand loses what your right hand gains.

HOWEVER - if you are selling the flats to third parties and not to your own company - then that will produce income and capital gains tax. The extent of that CGT depends upon your wider tax picture and history.

And if you're selling both flats to third parties, why would you want to retain the freehold - and thus retain responsibility for the management of the building ... which carries risks and liabilities?

Happy to discuss. Bernie Wales

Retaining the freehold is not without responsibilities. You would need to manage insurance and inspection/maintenance of the building to ensure your asset is protected. You would probably also need to get a fire risk assessment on the common parts and ensure compliance with health and safety legislation, (even if the common parts are a 1mx1m entrance lobby).