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Where Taxpayers and Advisers Meet

Complication resulting from Single ownership of a Freehold property

carolinehs
Posts: 25
Joined: Wed Aug 06, 2008 3:30 pm

Complication resulting from Single ownership of a Freehold property

Postby carolinehs » Mon Jan 06, 2020 7:24 pm

Hello TaxationWeb
I am not sure if you will be able to advise me on this, but any help with understanding the situation would be gratefully received.
My brother and I own a freehold property that is divided into two flats that we rent. I want to sell my portion of the property to my brother. We understand that I will have to pay CGT and my brother will have to pay stamp duty.
However, in order to pay me, my brother will have to take out a mortgage. He has just been told that if he keeps the freehold only in his name the mortgage rate will be more than 2x the rate if he had joint ownership with someone else.
He was also advised that he could create two "leasehold" flats and would then be able to get the cheaper mortgage.
We are both very confused by this.
Thank you.

SDLT Geek
Posts: 177
Joined: Sun Apr 30, 2017 5:45 pm

Re: Complication resulting from Single ownership of a Freehold property

Postby SDLT Geek » Mon Jan 06, 2020 8:27 pm

It is fairly common for lenders to want to take as security individual units of accommodation, not a building comprising several dwellings. So it might be that the way to structure your selling out your interest is by way of two long leases at low rents granted by you and your brother to your brother alone.

That will give your brother two leases to use as security. The freehold would then have low or nominal value (depending on the length of the leases and the rents).

pawncob
Posts: 4420
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Complication resulting from Single ownership of a Freehold property

Postby pawncob » Thu Jan 09, 2020 1:04 pm

You would need to consider the CGT position relating to the grant of, and eventual disposal of long leases before taking that route.
With a pinch of salt take what I say, but don't exceed your RDA


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