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Hey guys, new to this so hope I'm doing it right.I'm interested in purchasing a 5 bed freehold property and converting this into a HMO, but the developer selling has split a couple of downstairs rooms into a self contained studio flat. You wouldn't notice this from the property that a couple of rooms are missing and it has it's own entrance etc.The current owner will sell to me the property as a freehold and he would keep the studio leasehold - it will be a fly freehold lease with pepper corn ground rent and 999 years.I'm wondering what the disadvantages of this are, whether it's even worth touching?? Any insight/help would be much appreciated!
I'm far from expert but this isn't a flying freehold, that requires more than 1 freehold.
You are buying the freehold of the building and the developer is retaining a leasehold of part of it.
Gary are you thinking of commonhold when you say you need more than one property?
I used to have a flying freehold property that was a terrace that the 'gunnel' (go-between-tunnel) was underneath one of the bedrooms, I didn't own the gunnel but did own the room that 'flew' above it so the property had a flying freehold. No other property was involved in this flying freehold, just the one. There may of course be more than one type of flying freehold as I have only had experience of one and it was no problem. It was just a technicality to get over the fact that part of the property was over land that you didn't own.
I haven't heard of having to pay rent for a flying freehold, they are usually just that, a freehold and the land that is being flown over is mentioned in your deeds as a right of way. I can however envision different scenarios where the 'flying' is done over someone else's land and maybe that does entitle someone to pay ground rent (even at a peppercorn rate) but it sounds like an over-complication.
Your description is my understanding of a flying freehold, but someone/something owned the freehold of the gunnel, hence flying freehold.
Commonhold is different again, similar to a shared freehold but without the need to create a freehold/leasehold.
The OP has a leasehold unit in a freehold building and will be the freeholder of the unit.
You are buying the freehold of a block of flats not a flying freehold .You will need to create a long lease for your 5 bed flat
Although that is an option, it would require a separate freeholder to the leaseholders of the 5 bed unit and the studio.
I'm not aware of any issues with the OP's current arrangement as this is very similar to my current project.
If a residential mortgage is involved then leasehold is essential
Both leases will need to set out the owners obligations such as apportionment of the cost of repairs maintenance and buildings insurance
Future sales would be limited unless leasehold
As I don't have a mortgage, I skipped the bits regarding lender requirements. Its interesting to learn this, and it certainly could be a significant issue.
Have you checked out that the downstairs is legal, ie planning permission etc.
Thanks all, perhaps our estate agent is confused then if this is not a flying leasehold. We haven't yet seen the lease as it hasn't yet been drawn up. Do you have any specifics you would require in this situation? Does this sound like a nuisance property?
Douglas, no we haven't, I should do that then I assume!
It is possible that your estate agent, and perhaps the vendor, is confused; as a valuer I see it all the time when people don't really know how things are documented. I see quite a lot of flying freeholds and, remarkably very few real problems, although the theory suggests that they are problematic as the relationship between the parties is not necessarily documented.
If you are buying a freehold and part will be subject to a long lease, that sounds fine as long as the lease terms are not onerous - i.e. the leasehold should be paying a fair share of maintaining communal parts, insurance, etc.
I suggest that before you invest too much time or money, get the selling agent to explain what is proposed; if you are happy then get a good chartered surveyor and property lawyer to go through everything. The surveyor will look at things from a practical point of view, such as access, and may help you in negotiations, especially is a new lease is being established.