Can You Get a Bridging loan or a Buy to let Mortgage When a Property Title Needs to Be Split?

In some property transactions, the legal title of a property needs to be split as part of the completion process. This can happen where a borrower is purchasing part of a larger property, converting one title into several separate titles, or refinancing a property where the title structure is changing.

At Mercantile Trust, we may be able to lend where a title needs to be split on completion of our loan, subject to legal review, valuation, underwriting and full due diligence.

This can be useful in cases where the security property does not yet have its own separate title number but will be legally separated as part of the transaction.

What does splitting a title mean?

Splitting a title usually means separating one registered property title into two or more individual legal titles. This might involve creating a new leasehold title, transferring part of a freehold title, or separating individual units within a larger property or development.

Because this affects the legal security for the loan, solicitor involvement is essential. The borrower’s solicitor will usually prepare the transfer documents, while our solicitor will review them to make sure the proposed security is properly protected.

As with other solicitor fees, any additional legal costs connected to splitting the title would need to be covered by the customer.

Examples of where title splitting may be needed

We may be able to consider cases such as:

• Buying a multi-unit freehold block and splitting the titles on completion, where we are only lending on one unit.
• A freehold block of flats being split into individual flats, each with its own leasehold title.
• A flat above a shop being split into a separate title, where we are lending on the flat, subject to the type of commercial premises below.
• A completed development site or plot where the individual properties still need to be split into separate titles.

In these cases, the valuation and lending assessment would normally be based only on the property or unit we are taking as security, rather than the whole block, site or original title.

How does the process work?

These cases require full legal due diligence. Standard searches and title checks are needed, so this type of transaction is not suitable for title insurance.

The key difference compared with a standard legal process is that the solicitors also need to review the Transfer TP1 document. This document helps confirm that all necessary rights are granted and reserved for the benefit of the property we are lending on.

This can include important matters such as:

• Rights of access
• Services and utilities
• Maintenance responsibilities
• Shared areas
• Rights reserved for the property
• Any restrictions that could affect the future use or value of the security

This review is important because it helps protect the value, usability and future saleability of the property.

What happens if there is no title number yet?

In some cases, the new property title will not yet have its own title number at the point of completion.

Where this happens, the legal documents may use a property description instead. The documents are then sent to HM Land Registry with the TP1, and Land Registry allocates the new title number once the application is received and processed.

Our legal documents would be sent to the solicitors, who would complete the sections relating to the property description and title number once available.

Are there additional legal costs?

Yes, there are likely to be additional solicitor costs where a title split is involved. As a guide, the additional solicitor fee may be around £500, although this can vary depending on the complexity of the transaction.

Where a new lease also needs to be created, further legal costs may apply.

The customer should also make sure they have an experienced solicitor acting for them. Their solicitor will usually be responsible for preparing the transfer documents, while our solicitor will check that they are correct and that our security is properly protected.

How long does it take?

Because full due diligence is required and title insurance cannot be used, these cases are unlikely to complete as quickly as more straightforward transactions.

A more realistic timescale is usually around six to eight weeks, depending on the complexity of the case, the quality of the legal documentation and how quickly all parties respond.

For this reason, brokers should refer these cases to us as early as possible. Early referral gives our team the opportunity to review the structure of the transaction, understand the proposed title split and identify any potential issues before the case progresses too far.

Important points for brokers

If you have a case where the title needs to be split, it is important to flag this at the beginning of the enquiry.

Legal documents relating to the title split should not be completed too early, as they may need to be reviewed and dealt with later in the process. Brokers should advise clients not to rush the completion of these documents before the lender and solicitors have reviewed the case.

The key points to remember are:

• We may consider lending where a title needs to be split on completion.
• Full legal due diligence is required.
• Title insurance cannot be used.
• The borrower will need a capable solicitor to prepare the transfer documents.
• Our solicitor will review the documents to make sure our security is protected.
• Additional legal costs are likely.
• Timescales are usually closer to six to eight weeks.
• The value will usually be based only on the property or unit we are lending against.

Speak to us early

Title-splitting cases can be more complex than standard transactions, but they may still be possible with the right structure, legal support and underwriting approach.

If you have a case involving a property title split, speak to the Mercantile Trust team as early as possible. We can review the details, consider the proposed security and let you know whether it is something we may be able to support.