How to Mortgage a Broken Freehold Property

Struggling to secure a mortgage on a broken freehold? Discover why lenders say no, see real-world examples, and learn how Lime Finance Solutions can help

May 21st, 2026

How to Mortgage a Broken Freehold Property

In the world of property investment, standard configurations are king, not necessarily common, but definitely king! Lenders love simple structures: a clear-cut freehold building, or a standard leasehold flat with a healthy, unexpired lease term. The more simple the better (maybe something the new Commonhold will throw up in the air).

However as we all know, the property market is rarely that straightforward. As property investors and developers continuously seek out ways to maximise returns – whether through converting existing layouts or purchasing multi-unit blocks – they frequently run into more complex setups.

One of the most notorious stumbling blocks in property finance is the Broken Freehold.

If you’ve encountered a property with a broken freehold, you likely already know how quickly high-street banks can shut the door on your mortgage application. Which begs the question of what exactly is a broken freehold, why does it happen, and how to mortgage a broken freehold property.

What is a Broken Freehold?

A “Broken Freehold” (sometimes referred to as a severed or split freehold) occurs when the freehold title of a building and the leasehold titles of the units within that building are split or owned in an unconventional, asynchronous way.

It is more common than you think, especially when you realise how it occurs.

In a standard setup, a freeholder owns the building and grants leases (or Commonholds as will be) to individuals for the separate flats. If an investor buys the whole building, they usually buy the freehold title. If they want to leverage standard buy to let mortgage finance – they might create individual long leases for each flat under a separate limited company structure (subject to proposed changes to property legislation).

A freehold becomes “broken” when the relationship between the freehold title and the leaseholds creates a legal or structural loop that traditional lenders deem a risk, meaning high street lenders run for the hills.

The most common risk is that the freehold title cannot legally enforce maintenance or insurance obligations across all units, or the same individual owns both titles in a configuration that mainstream banking algorithms simply don’t understand. And that, is the problem some lenders have.

When Do Broken Freeholds Occur?

Broken freeholds don’t usually happen by accident; they are typically the byproduct of historical property deals, family arrangements, or DIY property conversions.

Let’s take a look at a few common scenarios:

The Over-the-Shop Flat Split: A business owner owns a freehold commercial building with a flat above it. To raise capital, they create a 99-year lease for the flat and sell it off, while keeping the freehold for the shop. Years later, they buy the flat back in their personal name. Now they own the freehold of the whole building and the leasehold of the flat.
The Multi-Unit Self-Conversion: An investor buys a large Victorian house as a single freehold and converts it into three self-contained flats. Instead of setting up a clean Multi-Unit Freehold Block (MUFB) mortgage or properly creating separate leases owned by a distinct limited company, they register leases to themselves or family members while maintaining the overarching freehold.
The Absentee Freeholder / Missing Link: A building is split into two flats with two leases. One leaseholder buys the freehold title but fails to merge or properly cross-insure the structural obligations of the other leasehold flat, effectively “breaking” the legal chain of responsibility required by traditional mortgage lenders.

The Challenge of Mortgaging a Broken Freehold

For mainstream lenders, consistency and repossession risk are everything. The lender is not looking at the risk of ‘now’ but the risk as it may be later. If a bank has to repossess a leasehold flat in a broken freehold setup, they need to know that the flat’s structure, roof, and communal areas are protected by a legally robust freehold. Something that may be more difficult when we move into a world of Commonhold properties.

If the legal titles are tangled, the lender faces a riskier scenario where they may not be able to enforce building maintenance. Furthermore, many high-street mortgage lenders have strict criteria stating that a borrower cannot be both the sole freeholder and the sole leaseholder of the exact same unit under the same legal entity, as the lease can technically “merge” into the freehold, erasing the security the bank is trying to lend against.

Because automated underwriting systems cannot process these nuances, the automated answer is generated. Unsurprisingly the automated answer will always be a swift “No.”

How Lime Finance Solutions Can Help

At Lime Finance Solutions, we pride ourselves on being a human-first, relationship-driven commercial specialist committed to putting our client first. Where high-street banks see a broken freehold as a risk to be avoided, we see a puzzle to be solved.

In most complex scenarios the actual picture is easy to understand, you just need to ask questions, establish what the real picture is and then put it into plain English a lender can absorb.

We specialise in structuring bespoke financial solutions for complex property structures, working closely with specialist commercial lenders, portfolio buy to let mortgage lenders, and bridging providers who will use manual underwriting rather than rigid computer algorithms.

Between understanding the lenders we work with and the structure of the broken freehold we can source the mortgage solution.

We help clients overcome the broken freehold challenge in several ways:

Title Restructuring Finance: We can arrange short-term bridging finance or specialised commercial funding to allow you to purchase the property and legally correct the title deeds (such as creating clean, lender-compliant leaseholds under a Limited Company).
Specialist MUFB & Portfolio Lenders: We have direct access to niche lenders who are perfectly comfortable holding both the freehold and leasehold titles as security, provided the overarching yield and property value show security and affordability.
Bespoke Underwriting: We package your case with a “Plain English” explanation, outlining exactly why the structure exists and how the legal risks are mitigated, giving human underwriters the confidence to approve the loan.

There is a little more to it, but from the borrowers perspective we will do the hard work behind the scenes.

David Farmer, Founder and Commercial Finance Specialist at Lime Finance Solutions, highlights the importance of an adaptable approach when dealing with non-standard properties:

“The property market doesn’t fit into neat little boxes, so neither should the property finance. A broken freehold can completely stall a transaction if you’re relying on standard lenders. At Lime, we look beyond the algorithms. Because we work with specialist partners who understand these complexities, it allows us to find a tailored mortgage structure that protects the client, satisfies the legal requirements, and ultimately unlocks the true value of the property.”

Don’t Let a Complex Title Stop Your Investment

A broken freehold can be a daunting legal hurdle, but it shouldn’t mean the end of your property investment plans. With the right legal advice and a creative, experienced finance partner, these properties can be successfully mortgaged and transformed into the highly profitable asset you thought it was.

If you are looking to purchase or refinance a property with a broken freehold, non-standard titles, or a complex multi-unit setup, get in touch and let us make your property finance simpler.

Q1: Can I get a standard buy-to-let mortgage on a broken freehold?

A: Similar to a SPV share purchase, in 99% of cases, no. Mainstream high-street lenders rely on automated underwriting systems that automatically reject properties where the freehold and leasehold titles are split unconventionally or owned by the same individual under a single name. To finance these properties, you will almost always need a specialist commercial or portfolio lender – we can help.

Q2: Why do lenders care if I own both the freehold and the leasehold?

A: If you own both titles in your exact personal name, there is a legal risk called “merger.” Under UK property law, if the same legal entity holds both the overarching freehold and a lease underneath it, the lease can technically merge into the freehold and disappear. Because a lender’s mortgage relies on the leasehold as its security, a merged lease leaves them with no valid collateral.

Q3: How do you “fix” a broken freehold?

A: The most common fix is to create a clean legal separation between the titles. This usually involves setting up a Limited Company (an SPV) to hold the freehold title, while you hold the individual leaseholds in your personal name (or vice versa). This satisfies lender requirements because the titles are owned by two distinct legal entities.

Q4: Is a broken freehold the same as a flying freehold?

A: No, they are different legal issues. A flying freehold occurs when part of one property physically extends over or under another person’s freehold property (like a room over a shared alleyway) without adequate legal covenants for support. A broken freehold is a structural or legal loop involving how the freehold and leasehold titles of the same building are split and owned.

Q5: Can I use bridging finance to buy a broken freehold?

A: Yes, bridging finance is often the best tool for the job. Because bridging lenders look at the asset and the exit strategy rather than strict high-street criteria, you can use a bridging loan to purchase the property quickly, legally restructure the titles into a lender-compliant format, and then exit onto a long-term specialist commercial mortgage.

Q6: Will a broken freehold affect the resale value of my property?

A: Yes, if it is left unresolved it potentially can. Because the pool of buyers who can get a traditional mortgage on a broken freehold is smaller, it usually reduces the property’s market value or limits you to cash buyers. However, if you resolve the title split during your ownership, you can unlock its full market value upon resale meaning there is the potential to add value to your property.

David Farmer

Over 30 years finance experience. Former credit underwriter, founder of Lime Finance Solutions in 2012. Multi Award winning business, featured in Sunday Telegraph, Parliamentary Review, Sky TV and others. Regular contributor to press and business associations. FCA Authorised, ALIBF Qualified. Specialist in Commercial Mortgages, Business Lending, Property and Development Finance.