Selling a freehold flat. Forced to sell as leasehold?

[torata]

My mother is selling her flat. It's a converted semi detached, and she owns the freehold with the flat upstairs as leasehold.

The lawyers for the buyers have said that for the buyers to get a mortgage, the mortgage company have said that my mother has to separate out the flat and the freehold, meaning she first sells her flat to the buyers as a leasehold, then (legally) has to offer the people upstairs first refusal on the right to buy the leasehold (which according to our solicitor they cannot take up because they cannot "form a majority alone")
After 2 months has passed my mother then sells the buyers the freehold.

a) this process seems just bizarre to me. Is it common?
b) my mother emphatically does not want to end up with the freehold, and the responsibilities that could bring, if the buyer suddenly turns round and says they don't want to buy the freehold. Is there any way she can mitigate this?

torata

[mc2fool]

My mother is selling her flat. It's a converted semi detached, and she owns the freehold with the flat upstairs as leasehold.

The lawyers for the buyers have said that for the buyers to get a mortgage, the mortgage company have said that my mother has to separate out the flat and the freehold, meaning she first sells her flat to the buyers as a leasehold, then (legally) has to offer the people upstairs first refusal on the right to buy the leasehold (which according to our solicitor they cannot take up because they cannot "form a majority alone")
After 2 months has passed my mother then sells the buyers the freehold.

a) this process seems just bizarre to me. Is it common?
b) my mother emphatically does not want to end up with the freehold, and the responsibilities that could bring, if the buyer suddenly turns round and says they don't want to buy the freehold. Is there any way she can mitigate this?

torata

I expect some legal eagle will come along and answer, but in the meanwhile (and anyway) https://www.lease-advice.org/ is a really good resource. At least once you've figured out how to navigate it.

[DrFfybes]

It is not uncommon - I had a similar issue when I sold a flat.

In fact, it was worse because the flat (and the one upstairs) were BOTH leasehold, with proper leases and everything, but I also owned the building Freehold.

The 2 were being sold as seperate entities on seperate contracts, but basically a couple of days before exchange their conveyencer decided it was a Freehold flat, informed their lenders, who withdrew the offer.

I said "Fine.I'll keep the freehold". All went through OK and I then sold them the freehold the week after for a quid. My solicitor was so incenced at theirs she did the transfer for free.

Paul

[Dicky99]

My mother is selling her flat. It's a converted semi detached, and she owns the freehold with the flat upstairs as leasehold.

The lawyers for the buyers have said that for the buyers to get a mortgage, the mortgage company have said that my mother has to separate out the flat and the freehold, meaning she first sells her flat to the buyers as a leasehold, then (legally) has to offer the people upstairs first refusal on the right to buy the leasehold (which according to our solicitor they cannot take up because they cannot "form a majority alone")
After 2 months has passed my mother then sells the buyers the freehold.

a) this process seems just bizarre to me. Is it common?
b) my mother emphatically does not want to end up with the freehold, and the responsibilities that could bring, if the buyer suddenly turns round and says they don't want to buy the freehold. Is there any way she can mitigate this?

torata

Offer first refusal of the freehold to the existing and new leaseholders on the understanding that if they opt not to buy it it will be offered for sale on the open market. They'd be foolish not to take it if the cost was minimal.

[Neutrino]

b) my mother emphatically does not want to end up with the freehold, and the responsibilities that could bring, ...

Neither does the bank.
Securing the mortgage on the leasehold only makes things simpler in the event of repossession.

[modellingman]

A common arrangement in the North East of England is that of "Tyneside flats". Here the two flats are organised so that the leaseholder of one is the freeholder of the other with the obligation via the lease to buy/sell both interests (freehold and leasehold) as one.

Converting an arrangement of a single building freehold and two flat leaseholds into a Tyneside flat arrangement is relatively straightforward (been there and got the T shirt), but requires

• the solicitors on both sides understand the Tyneside arrangement and how to get there
• the two leaseholders agreeing on the consideration for splitting the freehold interest into two parts

The latter is the starting point and will depend in your mother's case on whether the other leaseholder can be persuaded to play ball.

modellingman

[torata]

Thanks for the various comments. It was useful to get an understanding when talking to the solicitor.

torata

[Mike4]

One thing not explained here in detail AFAICS is that strictly, the term "Freehold" applies to land. And whoever owns land, also owns anything built on it. So the freeholder is the owner of the land the flats are built on, along with the main structure of the flats, and the leases granted by the freeholder give rights of access and use to the leaseholders.

Consequently the term "freehold flat" is a nonsense (Tyneside flats notwithstanding!). It usually means the land is owned by a company, which is therefore the landlord and grants the individual flat leases, then each flat leaseholder also owns a share in the company.

This arrangement is the origin of the term "freehold flat" most of the time in my experience. The term is bandied about by estate agents as shorthand for the above but people take it literally.

[richfool]

One thing not explained here in detail AFAICS is that strictly, the term "Freehold" applies to land. And whoever owns land, also owns anything built on it. So the freeholder is the owner of the land the flats are built on, along with the main structure of the flats, and the leases granted by the freeholder give rights of access and use to the leaseholders.

Consequently the term "freehold flat" is a nonsense (Tyneside flats notwithstanding!). It usually means the land is owned by a company, which is therefore the landlord and grants the individual flat leases, then each flat leaseholder also owns a share in the company.

This arrangement is the origin of the term "freehold flat" most of the time in my experience. The term is bandied about by estate agents as shorthand for the above but people take it literally.

Agreed. The expression used locally where I live, where the flat owners collectively own the freehold, is: leasehold flat plus share of freehold.

[SteelCamel]

Consequently the term "freehold flat" is a nonsense (Tyneside flats notwithstanding!). It usually means the land is owned by a company, which is therefore the landlord and grants the individual flat leases, then each flat leaseholder also owns a share in the company.

When I've heard the term "freehold flat" it's usually referring to flat with a flying freehold. In England and Wales these are a really bad idea, as it's very difficult to enforce rights against the freeholders above/below you. They're probably very rare if not non-existent now as the issues are well known, but if you do find one lenders won't touch it with a bargepole. (Scotland is a completely different case due to the different legal system)