Block of flats - freehold or leasehold

[ritfor]

Hello Folks,

Sorry if this is in the wrong place. I think it might fit into many of the forums. Point me in the correct direction if needed though!

I'm looking to invest in a block of 4 flats. Large terraced houses split into 4 self contained flats some while ago, with planning consent, fully tenanted. There a few around but with one fundamental difference - some are freehold, some leasehold.

I will be buying with a mortgage. I intend to carry on letting the property as is, and perhaps re mortgage in 5 years to release capital if the value has risen. I expect that I will need to focus only the freehold properties, not leasehold. But what are the considerations.

When looking to buy, how should a freehold property be set up in terms of:

Land Registry (one title I expect?)
council tax (four properties?)
utilities (all separate supplies?)
mortgaging (one property?)
insurance (one or four?)
is HMO a consideration (I assume not?)
and otherwise etc. etc.?

And how does this compare to how a leasehold block should be set up?

I welcome any facts you can share based on your expertise and experience, and any advice you might have.

(I have a few 2 bed BTL freehold terraced houses I let to single occupants. I'm not a Ltd company.)

Thanks,

ritfor

[DPT57]

If the property is fully converted into self contained flats then there should be a freehold for the whole property and individual leases for each flat. If there are not then you would need to spend significant sums to create leases for each flat if you ever want to sell them individually. Where this is not the case, you may also have issues of the flats not having separate utilities or addresses or council tax ratings.

Any that were fully converted before 1992 will probably be a s257 HMOs and you will have certain responsibilities regarding the common parts and possibly licensing issues, depending on the local authority

Any that are not quite fully converted will probably be regular s254 HMOs from what you describe and will probably be licensable and have significant other costs involved to run them as a single HMO building.

You need to get much more information on these properties before approaching lenders or insurers as the loans and cover will be different depending on the circumstances.

[Codger]

I had a block like you describe and sold it about ten years ago. It's much better to own the free hold
otherwise someone else is cutting your profit and deciding what to spend on improvements. If you own the lot you can make new leases if you want to sell piecemeal. I think leases are not the future.

[Gordon999]

If the terraced house and 4 flats are held under one freehold title , you probably have difficulty finding a mortgage . It may need a commercial mortgage from a bank lender .

If the terrace house has freehold title and each flat has leasehold title, the flats may be held under mortgage loan if the lease still has over 80 years term unexpired and ground rent payments are reasonable ( not doubling up after every 10 years ) .