Discover how MFB successfully negotiated 3 buy to let mortgages for a complex case involving freehold and leasehold ownership conflicts on newly converted flats.
At a glance:
- Experienced portfolio landlords with 30+ properties
- An 8-bedroom HMO converted into 3 luxury flats
- An expensive outstanding bridging loan that needed repaying
- A complex solution involving lender negotiation and subsidiary limited companies.
The Case:
As experienced portfolio landlords with over 30 investment properties, MFB has worked with these clients on over 20 cases since 2020. Having converted an 8-bedroom HMO into 3 luxurious flats, our clients needed to refinance to repay the bridging loan they’d used to complete the project.
The Challenge:
Refinancing a converted property to repay short-term loans isn’t usually a challenge; however, our clients wanted to create 3 individual leases for the new flats simultaneously.
By creating the individual leases, our clients would own both the freehold and leasehold of the units. In England and Wales, the law requires that separate entities own the freehold and leasehold. They purchased the freehold in their SPV Limited Company but could not own the leasehold in the same company.
For our clients, the benefit of having the flats on separate leases is that it makes it easier to sell them off individually if required, which also makes them easier to mortgage as it lowers the risk for lenders.
In addition, because the conversion had completely changed the property from an HMO to 3 separate flats, our clients required a Professional Consultants Certificate (PCC). Issued by a qualified architect or surveyor, this certifies that the project has been completed to a satisfactory standard.
The challenge for us was ensuring the preferred lender accepted the PCC provider. Like requiring you to use a solicitor from a panel, lenders have a panel of accepted warranty providers, meaning not all lenders would take this case.
Having spoken to a wide range of specialist buy to let lenders about the case, we found one that would accept the PCC provider. Then, working with our senior contacts at the lender and our clients’ solicitors, we found a workable solution for the freehold/leasehold issue.
We arranged that, upon completion, our clients’ subsidiary company would purchase the freehold while their solicitors create new leases for the individual flats. Our clients would own the leases in their original SPV, meaning that separate legal entities would own the freehold and leaseholds. We even negotiated with the lender to mortgage the 3 flats at 75% LTV, higher than the criteria initially allowed.
Our clients could repay their expensive bridging loan and now benefit from the additional rental income generated by the flats.
The Finance:
Each flat was mortgaged on the same terms:
Property value: £270,000
Loan amount: £202,500
LTV: 75%
Rate: 4.89% 5-year fixed*
Term: 25 years, Interest-only
Monthly mortgage payment: £842
Lender arrangement fee: 5% (£10,125)
The Review:
“Agata & Olivia delivered again!!! [...] They made a lender [give] us the best product with higher than usual LTV for this type of property and negotiated with them to get across so many hurdles.” 5-star Trustpilot review.
*Rate as at October 2024 and subject to change.
