Lenders Shying Away From Freehold Flats

The ongoing trend of mortgage lenders tightening their underwriting criteria and avoiding non-standard property structures continued yesterday as Yorkshire Building Society (YBS) updated its official lending stance regarding every freehold flat offered as security.

Prior to this recent update to their Part 2 CML Lender Handbook instructions, YBS maintained a geographical exception: the lender was willing to approve a mortgage on a freehold flat provided the property was located within the Scarborough area and a local conveyancing solicitor acted on behalf of the Society. Yesterday’s policy amendment officially removes this exception, leaving numerous freehold flat properties in Scarborough unmortgageable through one of the region’s most prominent lenders.

This adjustment reflects a wider industry aversion to the inherent legal risks associated with a freehold flat, particularly surrounding the enforcement of positive maintenance covenants, shared structural support, and mutual obligations between adjoining units.

This decision follows broader restrictive changes across the sector: just two months ago, 10 major lenders across England and Wales updated their CML Handbook instructions to conveyancing lawyers, confirming they will now only consider lending on a freehold flat or flying freehold where the Loan-to-Value (LTV) ratio is strictly less than 90%.

Resolving Freehold Flat Issues Today

Because positive covenants do not automatically run with freehold land in England and Wales, a freehold flat can present significant conveyancing challenges during a resale or remortgage. When a lender suddenly updates its handbook instructions to exclude these titles, sellers often find themselves facing unexpected transaction delays or mortgage rejections.

If you are dealing with buyer queries, lender restrictions, or title defect issues surrounding a non-standard title, read the comprehensive guide on freehold flat problems when selling or remortgaging to understand how original purchase records and deed arrangements impact your options.