Securing £1m for a Client Looking to Split Freehold into Seven Leases

What was the situation?

I was approached by a developer looking to purchase a building with seven units and some land on the freehold. Their intention was to split the title of the main building into seven individual leases and secure financing against each one based on the aggregate market value, rather than the block value.

The client wanted to keep the freehold separate and debt-free to facilitate obtaining planning permission and to develop another scheme.

Located in the West Midlands, the client sought to obtain a 95% loan-to-purchase price as a net loan on bridging finance initially. Subsequently, they required individual buy-to-let remortgages six months after completion.

What was the issue?

To begin with, the client had to negotiate with the vendor to split the leases prior to completion. This enabled the lender to work off the aggregate market value, which was approximately 30% higher than the purchase price. The client aimed for maximum funding to keep personal funds available for the development project when needed.

What was the process?

Due to the complex nature of this application, there were no ‘off-the-shelf’ products available to meet the client’s needs. Instead, I worked closely with a trusted lender to design a specific product tailored for this below-market-value transaction, understanding that the client intended to add value by splitting the title into seven individual leaseholds.

Once the lender agreed, the process was relatively straightforward. Fortunately, we encountered no hitches or pitfalls along the way, thanks to partnering an experienced client with the most suitable lender for their development plans.

What was the solution?

Despite being priced below market value initially, our diligent assessments, document collection, and established lender relationships allowed LDN Finance to find a solution and place the application with the most suitable lender on the first attempt. This demonstrates the value of an adviser, emphasising the importance of fully understanding the deal and its requirements.

We successfully secured over £1 million in lending for our client at a market-leading rate. We structured the loan in such a way that allowed us to maximise leverage by splitting the leases, enabling the client to move quickly on planning while retaining ample equity for use in phase two of their strategy.

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