Background: Selling Two Flats and the Freehold

John, a landlord in a rural market town, owns a small detached freehold building containing two self-contained flats. He purchased the flats eight years apart and recently attempted to sell both flats together, including the freehold interest. Despite listing the properties last year, he was unable to find buyers and subsequently re-let the flats.

The local estate agent expressed concerns that offering each flat with a share of the freehold—a feature often seen as advantageous—might actually make the flats unmortgageable. This is because with only two owners, the management of shared responsibilities such as building insurance depends heavily on cooperation. The agent worried about potential complications if the owners failed to agree on such matters.

Challenges of Selling Flats with Shared Freehold

John ideally wants a single buyer to purchase both flats and the freehold, but this approach has only attracted low offers from investors. The difficulty lies in the fact that shared freehold ownership requires ongoing collaboration between flat owners, which can be a deterrent for some buyers and mortgage lenders.

The concern about mortgageability is significant. Mortgage lenders often prefer freehold properties or leasehold flats with established management structures. When only two owners share the freehold, lenders may perceive a higher risk if disputes arise or if one owner fails to meet obligations such as paying insurance premiums or maintenance costs.

Handling the Freehold in a Sale

Recently, one of the tenants expressed interest in purchasing his flat. John is keen to transfer the freehold as part of the sale but is uncertain how to manage this process. He acknowledges that legal advice is essential but notes that even his rural solicitor is unfamiliar with the specifics of such transactions.

In cases like this, the freehold can be sold in several ways. One common method is for the buyer(s) to acquire the freehold interest jointly, often through a company or a formal freehold ownership agreement that sets out responsibilities. Alternatively, the landlord can sell the freehold to one party who then manages the building or leases the flats to others. However, these arrangements require careful legal drafting to avoid future disputes.

What This Means for UK Landlords

Landlords considering selling multiple flats with the freehold should be aware of potential complications:

– Mortgage lenders may be cautious about lending on flats with shared freehold, especially when only a few owners are involved. This can limit the pool of potential buyers.
– Clear agreements on managing shared responsibilities such as building insurance and maintenance are essential to reassure buyers and lenders.
– Legal advice from solicitors experienced in freehold and leasehold sales is crucial to structure the sale properly and avoid future conflicts.
– Selling both flats to a single buyer might simplify management but could attract lower offers, particularly from investors.

John’s experience underscores the importance of understanding the complexities involved in selling flats with a freehold and the need for specialist legal support to navigate these issues.

Summary

Selling two flats with the freehold interest presents unique challenges, particularly regarding mortgageability and shared ownership responsibilities. UK landlords should seek expert legal advice and carefully consider how to structure such sales to attract suitable buyers and ensure smooth management post-sale.

Suggested internal link anchors

• selling flats with freehold
• shared freehold ownership
• mortgageability of flats
• building insurance responsibilities
• freehold transfer process
• leasehold and freehold sales
• legal advice for landlords
• investor offers on flats
• property management agreements
• tenant purchase of flats

TLA update

TLA is launching a new Trusted Partners Hub in Q1 2026, featuring verified and approved service providers selected to support landlords, tenants, and property management businesses. We are inviting legal, trades, insurance, financial, mortgage, tenant screening, and other service providers to register their interest here: https://landlordassociation.org.uk/become-a-tla-service-partner/