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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 8445
Experience:  I have been practising for 30 years.
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My wife and I own a freehold investment property which

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helloMy wife and I own a freehold investment property which consists of two self contained flats let out on assured shorthold tenancy agreements.We are in the process of refinancing and our lender has requested that we create a long lease on each of the flats and held in our joint names. Our solicitor has informed us that it is not possible to hold a freehold and leasehold in identical names. Our lender though insists that the titles be held in joint names as they will take a charge on both the freehold and leaseholds.We have ruled out the possibility of setting up a company to transfer the freehold into for tax reasons.Can you explain whether or not it is possible to be freeholder and leaseholder and what is the process required to satisfy both the lender and the law.Thank youMartin
Submitted: 3 months ago.
Category: Law
Expert:  F E Smith replied 3 months ago.

What you have been told by your solicitor is absolutely correct.

The usual way of dealing with this would be for the two of you to form a limited company and be shareholders directors of the limited company and then transfer the freehold of the property into the limited company. I don’t know what the tax position is that precludes you from doing that.

If the lender wants the freehold to be in both your names and each of the leaseholds to be in both of your names, then the lender is asking for an impossibility.

You could have the leasehold in either of your names and the freehold in joint names or you could have the freehold in either of your names and each of the leases in joint names.

Can I clarify anything for you?

Please don’t forget to rate the service positive. It’s an important part of the process by which experts gets paid.

Best wishes.


Customer: replied 3 months ago.
The reason the limited company route is closed to us is that we have owned the property for 28 years and have a large capital gain, if we transfer the freehold to the limited company it is deemed as a disposal for capital gains tax purposes.Could clarify for me whether there is anything wrong with the following scenario;1. I transfer my half share in the freehold to my wife
2. My wife then grants a lease on each flat in our joint names
3. Shortly afterwards my wife then transfers half the freehold back to me, so that we are joint holders again of the freehold and joint holders on the leases.I know this would essentially render the leases void but it is the only way the lender is prepared to accept it.Is there are reason from either a legal or professional standing why this can't be done.Many thanksMartin
Customer: replied 3 months ago.
Forgot to mentionI assume I rate your service when the questioning has concluded, which I will do. Should I though be rating the service on each question answered?RegardsMartin
Expert:  F E Smith replied 3 months ago.

I don’t think that argument for capital gains tax applies. You are not transferring for a gain, but for a nominal sum. In any event, it depends on the value of the freehold which is usually not that much. Even so, you would normally be transferring it for 1 pound. How you take advice from a tax expert on this?

You simply cannot do what you are doing. As soon as the properties come back into common ownership, it extinguishes the leases. It may satisfy the lender (whether you have been speaking to the lender clearly does not have the basics of English landlaw) but it makes the properties unsellable. I would suggest that you ask whoever you have been speaking to at the lender, to refer this on to their legal department. That request would be better coming from your solicitor. The solicitor can explain the way the law works and hence ask for it to be reviewed by one of the lenders solicitors.

Rate the service whenever you like. The thread remains open and we can still exchange emails.

F E Smith, Advocate
Category: Law
Satisfied Customers: 8445
Experience: I have been practising for 30 years.
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