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Difficulty buying a property converted into two flats

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I have just had an offer accepted on what used to be a two bed terraced house, which has been converted into two one bed flats. The property is still under one address, with one access and is freehold. I am looking at buying the property through a ltd company with a view to renting them as holiday lets. 

The problem I appear to be coming up against is that mortgage companies want to lend on the basis of the flats being set up with ast’s in place rather than short lets and my solicitor said that really the freehold needs to be split into two leaseholds, but that it’s not possible to own both the freehold and the leasehold. 

I don’t want to give up too quickly just because it is sounding very convoluted, but equally I don’t want to waste mine or anyone’s else time or money, if it’s not going to be a worthwhile investment.

Any information or advice about how best to approach this would be greatly appreciated!



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Hi @graemec

It is possible to own the freehold and the leaseholds.  Lenders, however, do not usually like this.  Thus, this is more a commercial issue, instead of a legal issue.  Having said that, your solicitor should be able to advise you on possible structures that lenders would be happy with.  For example, (a) you could put in place a shell company to hold the freehold, and then the two leaseholds are held by your company, or (b) you could hold the freehold, and then give your company the two leaseholds, or (c) a trust arrangement.  If your solicitor does not provide you with a solution / advice (as opposed to just saying no), I would recommend that you change your solicitors instead, cause this is do-able.

Regaring the issue of AST instead of holiday lets, you may have to engage with specialist lenders who do holiday let mortgages.  You should get a mortgage adviser to help.  It may also be possible to put in place a rent-to-rent model to sidestep this AST issue, but this would likely require an arm's length party to help you.

For the avoidance of doubt, the above (a) does not constitute legal advice (and no lawyer-client relationship is formed in any way) and (b) is set out for your reference only.  You should seek formal legal advice (and mortgage advice) for your matter.


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Hi Kerry, 

Thank you so much for your comprehensive reply. 

I’m not going to give up just yet then. I’ve gone back to my solicitor with the options you have mentioned and we’ve been in touch with a mortgage broker who we have used before who is coming back to me with various options. The estate agent has also said their mortgage advisor may be able to help, so a few things to go at. 

Thank you for taking the time to respond, it’s very much appreciated! 

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