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HSBC panel solicitors to reconsider position on freehold flats.

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HSBC last week made another change to their CML Handbook Part 2 requirements. This time the amendment was made to the wording of paragraph 5.7.b which relates to whether HSBC will lend on freehold flats.

In truth,freehold flats are as rare as a QPR win in the premiership. Most flats in England and Wales are subject to leases. The reason why lenders are concerned about their security in a freehold flat is that owners (or mortgagees in possession) of freehold flats run into difficulty when major structural problems arise with the property. Unless there is a legal agreement in force between the owner of the freehold flat and the owners of adjacent properties there could well face significant problems in the future in agreeing structural repairs and their associated costs. Thus HSBC’s stance is now as follows:

“Freehold flats or freehold maisonettes are not acceptable unless the customer will on completion also acquire (or already has) the whole or a share of the freehold of the building itself, provided there are mutual rights of support and maintenance and mutually enforceable covenants, usually including a deed of covenant, being entered into each dealing with the property between the existing/other flat owners and the incoming purchaser. The bank may also need to refer the case to the valuer and indemnity insurance may be required”.
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