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  • Section 24 HQ

    Mixed use, share of freehold, SDLT, S24

    If I buy a flat that comes with a share of the freehold of the property and the property has a shop on the ground floor can it be classed as a mixed use purchase for SDLT purposes?

    I'm not buying the lease of the shop I'm just buying the lease of the flat and a 50% share of the freehold.

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    I doubt so.

    First you would buy a long lease of the flat, hence pure residential, and (potentially, but I will explain why not in reality) the share of freehold (mix commercial/residential, hence commercial) as a separate title.

    Not in reality, because my understanding is that if the commercial part is more than 25% of the total building, the freehold would stay with the commercial shop, and the flats sold as long lease only. But even if below 25%, I never seen any flats with share of freehold in a building that is mix commercial/residential.

    Different could be if the shop has a 999y lease at peppercorn (virtual freehold), and the freehold is represented by the rest of the building, hence the flat, that way you own a mix residential/commercial building where in reality is a flat plus freehold with shop sold as virtual freehold.

    Said that, look for solicitor advise, it is a complex topic, I own a virtual freehold of a shop, and in another case I own a freehold of a mix/residential commercial with two residential flats sold off, and I am looking at other deal mix residential/commercial and I gain experience via the deal done in the past as mix etc etc

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    Thanks for the reply.

    As it turns out the flat (four bedsits) are to be sold with the freehold (no share of freehold) and the shop will already be on a 999 year lease. So I think that this will qualify as a mixed use purchase, but please correct me if you think otherwise.

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    Yes, I think that the Freehold you buy is classified Commercial, being mix residential/commercial - but please double check with your solicitor.

    I am looking exactly at a very similar deal, where I would buy the entire freehold "in a way", specifically the Freeholder would sell the 999y shop to my SIPP (already two commercial property own via my SIPP), while I would buy the Freehold (with virtual freehold shop sold-off) that consist of two flat, with a Limited I am already using/having to own other Freehold/property investments.

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    If the properties are separate then I think this is a mixed use and the SDLT additional 3% wont apply. Only commercial rates will apply.

    If your solicitor needs some convincing then give me a shout (stuart@johnsonsca.com)

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022