Residential property investors and developers have always sought out large freehold properties where the building may have been physically separated into flats but legally it exists as just one freehold.
These properties which are common in some of our seaside towns provide an opportunity for a property investor or developer to legally split the freehold title into flats and by doing so potentially realise greater value from the property on the basis that the total values of the flats may often significantly exceed the value of the property as one freehold.
Following the split into flats the property developer will typically sell off the flats potentially retaining the freehold as a ground rent investment. For the property investor they may retain the property but raise finance on the individual leasehold units.
In more recent years this has become popular in town centres where empty offices are being acquired and then using the planning permitted development rights changes to residential provided prior approval has been obtained from the local authority.
Town centre living is now popular and with the price of large office freeholds at a low, landlords wishing to dispose to avoid business rates and the costly energy efficiency changes required the general permitted development rights have created a new market for lease creations.
You must of course initially ensure that you have lawful use from a planning perspective and that any works that need to be undertaken to physically separate the flats is undertaken in accordance with building regulations but following this there are a number of matters to consider from a legal perspective including:
- Setting up a freehold management company to hold the freehold following the lease creation.
- Lease plans will be needed before the leases can be drawn up identifying the extent of the flats and common areas. Attwells can provide you with contacts here.
- Drafting of the leases to ensure they are compliant with the Lender’s Requirements but also preserve as much value as possible for the freeholder.
- Lender requirements concerned with the 6 month ownership rule.
- Raising finance if required.
- Producing a comprehensive sales pack if sale is the intended exit
Attwells are experts in residential lease creations and Nick Attwell would be happy to have chat through with you about any queries concerning lease creation. Nick is available on 0207 722 9898 or you can e-mail him at firstname.lastname@example.org.