Freehold Title Splitting – Where Do I Start?

My Telephone Consultation Service tends to keep me fairly busy with all kinds of questions to do with my area of expertise.  This time the question was about how to get started down the road of freehold title splitting. Here’s what I had to say;

Dear ?????

Thank you for your questions about getting started down the road of freehold title splitting … and the main things you should be considering.

Sourcing suitable properties can be time-consuming, especially if you let estate agents send you details of every large property they have on their books. You really need to be clear about exactly the type of building you’re interested in – and reject everything else they send … explaining why, so they hopefully learn for next time.

Rather than approaching estate agents, I would suggest contacting lettings agents instead. Ask them if they have any ‘tired landlords’ or retiring landlords on their books – particularly where the landlord lives in part of the property. The properties they show you will most likely be interesting and if you’re really lucky you’ll find buildings which are presently one freehold building, but which have been physically split into several flats. These are ideal because there is limited building work to do – although you will have to check that they meet Building Regulations and have Planning Permission … even if the landlord says they comply and have been signed off.

The other advantages of such situations include the landlord probably not needing to sell in a hurry. This opens the possibility of an option, or a delayed completion, or a joint venture. All these methodologies have advantages for your cash flow – and when you add the fact that the landlord already has tenants in the property … you’re on a winner as you’ll have cash flow from day one.

Buying the property has a number of considerations. You’ll probably need commercial finance, a bridging loan or … best of all … private funding. Whichever route, get started on the ‘vetting process’ now, as it can take many weeks to complete. Better to have the funding ready but no property, rather than the other way around.

But make sure your lender understands your business plan and in particular the fact that you’re going to be ‘slicing’ their security and selling it off bit by bit (in most cases). Make sure you have a clear agreement on how flat sale proceeds will be distributed – some to the lender and some to you, so that all are happy.

Also consider whose name the property should be in. Usually it’s best to buy the freehold in a company name – as with most ‘trading’ activity. Retain any flats you’re keeping in your personal name – as with most ‘buy and hold’ property investment. But you should check your particular tax circumstances with your accountant – well in advance.

Using my “Shaving Foam Technique” (see note below) create the leases in such a way as to maximise the residual freehold value. This will maximise your selling price for the freehold after the flat leases have been created – but if you’re hanging on to any flats long-term, make sure you don’t shoot yourself in the foot with onerous lease clauses. And if you need help finding a freehold ground rent investor, you know where I am.

If you haven’t seen my presentations on ‘The Shaving Foam Technique’ you’ll be interested in my Leasehold Home Study Course.  This will also give you a good understanding of leases and leasehold generally – which will save you a fortune by avoiding costly errors. Find out more here >

Ultimately, there’s a lot to know when it comes to freehold title splitting but it does open a very big door to some very good opportunities.

Best wishes.

Bernie Wales


Freehold Title Splitting – Where Do I Start? — 5 Comments

  1. Hi Bernie,

    Thanks for post this information.

    One question about the article above: you suggest keeping a special eye out for landlords living in part of the freehold building – is that with a view to exploring options and delayed completions or something else?

    • Hi Felix.
      The reason I mentioned landlords living in the property – is that those properties tend to be on one freehold title but are often physically seperate flats.
      But yes, where the landlord lives on the premises, there may well be opportunities for options, delayed completions or other creative strategies.

  2. Hi Bernie,

    If a brother and a sister own the freehold to a house (either a joint tenancy or as tenants in common) and they want to create two leasehold titles for themselves – i.e. the ground floor for the brother and the top floor for the sister), how can they do this? Would SDLT or any other taxes be imposed?

    • You can create the two leases – and have the brother as one leaseholder … and the sister as the other leasehold. As you’re “selling” the flats/leases to the individuals – I think SDLT would apply. However, check with your conveyancing solicitor.

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