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Multi-Unit Freehold Block / Unbroken block of Flats

What is a Multi-Unit Freehold Block?

Why you need an adviser that understands multi-unit blocks of flats, broken up blocks of flats and unusual circumstances!

Are you losing out by not having multi-unit blocks of flats as part of your investment property portfolio strategy? Why not let us assist you with the financing of Multi-Unit blocks of flats.

Often abbreviated as MUBFs, this type of asset class is proving to be very popular for many landlords. But what is it that attracts investors to multi-unit blocks of flats?

  • Less management time – They are easier to manage than multiple individual flats and houses as they are all within the same block. This will help improve your time management across your portfolio as you are not having to drive to multiple properties.
  • Block Discount – MUBFs consisting of multiple units are often cheaper to purchase than if you were to buy the equivalent number of flats but as separate units – this is referred to as the block discount.
  • Higher Yield – The potential yield produced from a MUBF will also attract investors to these properties as they tend to produce higher yields. This is because of the block discount and the rental income being the same as equivalent long leasehold flats.

 

What is a unbroken and partially broken block of flats? 

A unbroken block of flats is another name used mainly by Estate Agents where marketing these properties for sale. The term aims to explain to would be buyers that non of the flats have not been separated or broken up onto separate long leaseholds. Despite a different name a property that is a “Unbroken block of flats” is the same a multi-unit freehold block from a lenders and valuers perspective.
 
You do come across some properties that are “a partially broken block of flats” which usually means 1 or more of the flats in the block has had a leasehold title created for it. For example a block of 10 flats has 2 flats that have leaseholds created and as such 8 flats are still part of the freehold title. The property is still classed as a multi-unit block of flats but because 2 are subject to leaseholds they cannot be included in the value of the freehold property and some lenders will not lend on these properties because they want unbroken blocks of flats as security. There are still lenders that can lend on partially broken blocks of flats but this where you need an expert in this field such as Advocate Finance to approach the right lenders
 

Multi-Unit Block of Flats Financing 

However, financing of MUBFs (Multi-Unit Block of Flats)  is not as straightforward as it may be for simple singular houses and flats. There are fewer lenders available and many mortgage advisers do not have the required level of expertise. Fortunately, the advisers at Advocate Finance are experts in this area of Buy-to-Let lending. We also have access to a large range of lenders and products that will best suit the scenario you are faced with when it comes to multi-unit blocks of flats.

Finding a solution for your standard blocks of flats is not too problematic in the current market. However, when there are quirks and unusual circumstances related to these properties, this is when it can become challenging. Fortunately, the knowledge we have on this area allows us to find you a solution when no one else can.

Quirks and unusual circumstances

What do we mean by quirks and unusual circumstances being related to your MUBF? Some of the scenarios are as follows –

  • Firstly, we do have access to lenders who can accept blocks of flats where some of the individual units within the block may be below 30 sq metres. For many lenders this is a problem. 
  • We also have lenders available that can lend on a block of flats when the utilities for the separate units originate from the same mains (gas, electricity etc.).  
  • Another problem area that we can help with is finding a lender to  accept a MUBF that may have some of the flats sold off/kept on separate leasehold titles .This is sometimes referred to as a broken-up block of flats as the block consists of both a freehold block and separate leasehold flats. 
 

Do multi-unit freehold blocks need HMO licensing?

You will have read in the section above that there are general rules on when an multi let, HMO property requires a licence. But the local council can change this and implement their own requirements. Lenders therefore cannot keep track on which councils have moved away from the general definition of when a licence is required. The lender will therefore require confirmation in writing or email, from the council when the property does not require an HMO licence.

For HMO properties that do not require a licence the next important factor in selecting a lender is:
  • Will the lender value the property based on the market rent as a multi let, HMO or a single family rent. This is extremely important to you and your HMO mortgage broker because lenders assess this differently and the amount you can borrow is dependent on the market rent.
  • The number of tenants. Some lenders limit the number to 4. Some lenders have no limit.
  • Does each tenant have their own tenancy agreement or have they signed one tenancy agreement?
  • Do the rooms have locks on the doors? This will be reported to the lender by the valuer when they visit.

You will see that mortgages for HMO or multi let properties can be complicated and this is why it is best to talk to an HMO mortgage broker, who is very active in this market. It is a complicated sector that is changing all the time and if you wish to avoid wasting time and money, then please call us for a free assessment.

  • Gain access to our expert knowledge of the sector
  • Mortgages for buying multi-unit freehold blocks of flats
  • Remortgaging a multi-unit freehold block of flats
  • 100% mortgages for multi unit freehold blocks of flats with additional security
  • 75% mortgages without additional security
  • Interest only mortgages available
  • Fixed rate options available
  • Terms 3 to 30 years

Multi unit freehold blocks of flats are just one area of expertise we deal in. We can also provide mortgages for multi let properties. Also sometimes known as HMO properties except they don’t require a licence.

How we can help you

We are ready to help you with your Multi-Unit Block of Flats enquiry today. The advisers at Advocate Finance are experts in this area of Buy-to-Let lending including  dealing with broken up blocks of flats and unusual circumstances.

Frequently Asked Questions

80% loan to value is the current maximum where the only security provided to the lender is the MUBF.

However we have lenders that can consider lending with an additional security charge on another property with sufficient equity meaning that we have successfully arranged mortgages of 100% loan to value for MUBF’s. Call us to find out more how this works

 

Absolutely – Whether the property is converted or a purpose built block of flats makes no real difference to a lender that will provide a multi unit freehold block mortgage. There a large numbers of large freehold houses that have over the years been converted to 2 or more flats and we have arranged mortages and loans for these properties

The main difference is the shared facilities and services. With HMO’s facilties such as bathrooms, kitchens which can be shared between the tenants with a HMO but with a multi unit freehold block the units are all independent of one another and there are no shared facilities.

The other big difference is services such as electricity, gas and water. Multi-Unit Freehold Blocks in the vast majority of properties all have separate service supplies to each unit. A HMO normally has only one supply of services which the room shares and as such the rents are normally inclusive of these costs.

 

This is a mis-conception that Banks don’t lend on multi-unit blocks of flats. High Street Bank commercial depts can lend on these properties as such as specialised banks and other specialised lenders who have the internal expertise, knowledge and experience to provide quick credit decisions

Yes – You can obtain a buy to let mortgage for a multi unit freehold block. There is sometimes some confusion as to whether you need a buy to let or a commercial mortgage for a multi unit freehold block. 

Further Information You May Find Useful

Paragon Bank

13 April 2022

Paragon Bank  –  Complex HMO & MUBF lender of choice? Are you an existing buy to let landlord who owns

Read More »

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Important Information
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

We are a credit broker not a lender.

Advocate Finance Ltd, registered at 55 Crown Street Brentwood, Essex CM14 4BD. Company Register number is 05579380. Authorised and Regulated by the Financial Conduct Authority. Our FCA registration number is 592830.

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