Case study: restructure of a criss-cross leasehold
Commercial Property Associate, Salma Maqsood, acted for a seller on the restructure of their property to increase its potential and investment.
The property was split into two flats, held as a criss-cross lease. This means the leaseholder of downstairs flat owned the freehold of the upstairs and the leaseholder of upstairs owned the freehold of downstairs flat.
Our client was the registered proprietor of both the leasehold and the freehold of both flats, and they wanted to redevelop the property into three flats.
Our Commercial Property team liaised with the client to discuss how this could be achieved and options available. Salma referred the client to his accountant to discuss which of the options were the most tax-efficient way for this client to proceed.
On this occasion, it was agreed that the team would proceed with merging the leasehold and freehold titles in the property to effectively start with a ‘clean slate’. Salma liaised with the land registry on merging the existing leasehold and freehold titles (as our client was the registered proprietor of all of them) so that the client was left with one freehold title.
Our team set up a management company for the flat on behalf of the client, to relieve some of the responsibility from our client, as they intended to sell/refinance each flat going forward. Setting up a management company is attractive set up to both lenders and buyers.
Salma then drafted long leases for each of the three flats and transferred the freehold of the property to the management company, who then granted the leases back to our client; the most tax-effective method.
Our client was then left being the registered proprietor of three long leaseholds, which he can sell or refinance individually.