What is a multi unit freehold block (MUFB)?

What counts as a MUFB, and what does not

There is no statutory definition of a MUFB. It is a market term, invented largely by lenders to describe a category they underwrite differently, and it has spread from there into everyday investor language. That matters, because it means the label is drawn slightly differently by every lender, valuer and insurer you deal with.

What people generally mean by it is a building where:

• every unit is self-contained, with its own kitchen, bathroom and lockable front door
• the whole thing sits on one freehold title, in one owner's name
• each unit is let separately, usually on its own tenancy

Purpose-built blocks of flats, Victorian houses converted into three or four flats, a shop with flats above, and two or three houses sitting on one title all get called MUFBs. So do buildings of forty units. The term stretches a long way.

A MUFB is not an HMO

This is the confusion that costs people money. In a house in multiple occupation, tenants rent a room and share a kitchen or a bathroom. In a MUFB, each tenant has a complete home behind their own door. The buildings can look similar from the street and they are treated completely differently by lenders, valuers, insurers and the local authority. A conversion from one to the other is a real project, not a relabelling exercise. One wrinkle worth knowing: a converted block of self-contained flats can still count as an HMO for licensing purposes under section 257 of the Housing Act 2004. The three tests are set out in block of flats, or a Section 257 HMO?

A MUFB is not a block with leaseholders in it

If the flats in a building have already been sold off on long leases, the freeholder owns the structure and the ground beneath, but not the flats. That is a different asset with a different income, different obligations and a different buyer. A MUFB is a block where the owner still holds everything.

Why investors buy blocks instead of houses

The honest case for a block is not that it is easy. It is that the work does not scale with the number of units the way it does with scattered single lets.

• One purchase, several incomes. One search, one survey, one legal completion, one lender, one set of fees, and at the end of it you own several rent-producing homes rather than one.
• Voids hurt less. When a single let empties, your income from that property goes to zero. When one flat in a block of six empties, you lose a sixth.
• One roof, one boundary, one insurer. Maintenance is concentrated in one place instead of spread across a county. So is your management time.
• You control the whole building. Nobody else has a say in the roof, the common parts, the insurance or the management. That control is exactly what makes the exits below possible.

The trade-off is that everything about a block is more specialist: the finance, the valuation, the compliance and the buyer pool when you come to sell. None of that is a reason not to own one. It is a reason to know what you are walking into.

The thing nobody explains: a block has two values

This is the single most useful idea an owner can hold about a MUFB, and it is the reason the strategies further down this page exist at all. The same building can be measured two completely different ways.

Those two numbers are rarely the same, and on many blocks the gap between them is substantial. Which number applies to your building depends on what the flats can legally be sold as, which depends in turn on the titles, the leases and the lending. That gap is the whole basis of the title split strategy, and it is also why a block can feel simultaneously cheap to buy and hard to sell. How a valuer actually reaches each number is explained in how a valuer decides what your split units are worth.

How blocks are financed

Most high street buy-to-let mortgages are written for a single dwelling on its own title, which is why they generally will not stretch to a block. Blocks are handled by specialist lenders who look at the building as an investment: the total rent it produces, the mix of units, the tenancy types, and how experienced the borrower is.

Bridging finance shows up frequently too, because blocks are often bought in a condition or a legal state that a term lender will not touch yet, and refinanced onto a term product once the work is done. The gap between the two is where a lot of block projects go wrong.

The four ways out of a block

An exit decided at the end is worth less than one designed at the start. There are four, and a block can move between them.

1. Hold it and run it. Keep the block on one title, let the units, and take the income. The simplest route, and the one that gives you the most flexibility later, because nothing is closed off.
2. Refinance and hold. Improve the building or the rent roll, revalue on the higher income, and pull capital back out to buy the next one. This is how most block portfolios are actually built.
3. Title split. Create individual leasehold titles for the flats so each one can be mortgaged and sold separately. This is what moves the building from the left column of the table above to the right column. It involves legal work, lender consent, and careful sequencing around tax and finance.
4. Sell the whole block. Sell the building as it stands, on one title, to another investor, or sell the company that holds it. Fewer buyers than a flat has, but a much shorter timetable than a split. We Buy Blocks is one of those buyers.

You do not have to split a block to sell it, and splitting is not automatically the right answer. It is one of four options, and which one wins depends on the building, the local market for individual flats, your tax position and how quickly you need the money.

What makes blocks harder work than a single let

Anyone selling you a block strategy should tell you this part too.

The common parts are yours

The hallway, the stairs, the roof, the external fabric, the bin store and the parking are all your responsibility, and every tenant uses them. That brings maintenance, cleaning and repair obligations a single let does not have.

Fire safety is a serious obligation, not a formality

Owning a building with multiple residential units and shared common parts brings fire safety duties that attach to those parts. What applies to your building depends on its height, its layout, its construction and where it is. This is territory for a competent fire risk assessor and, where relevant, your local fire authority. Do not take it from a guide, including this one, and do not leave it until the lender asks. What the duty is, who carries it and what else comes with the common parts is in the freeholder's duties in a block of flats.

Licensing varies by street, not just by council

Selective and additional licensing schemes are set locally and change. Two identical blocks in neighbouring boroughs can have entirely different requirements. Check with the specific local authority before you exchange.

Insurance is a single policy covering everyone

A block is normally insured under one buildings policy for the whole structure. Getting the sum insured, the occupancy declarations and the tenancy types right matters more than it does on a house, because a mistake affects every unit at once. The whole subject is in insuring a block of flats.

The buyer pool is smaller

The same specialism that keeps competition down when you buy keeps it down when you sell. A block sells to investors who understand blocks. That is a manageable fact if you plan for it, and an unpleasant surprise if you do not. Who those buyers are, and how to present a block to them, is in selling a block of flats.

Where title splitting fits

If the two-values table above made sense, title splitting is simply the process of moving a building from the left column to the right: creating separate leasehold titles so that each flat can stand on its own, be mortgaged by an ordinary buyer, and be sold to an ordinary buyer.

It is not free and it is not quick. It involves a solicitor drafting leases, Land Registry registering new titles, consent from any lender with a charge over the building, and a tax conversation before rather than after. Whether it is worth doing on a given block is an arithmetic question, and the arithmetic is specific to the building. The steps are in the title split process, step by step, and the bill in how much a title split costs.

It is also, for the right building, one of the largest single value-add moves available in UK residential property. That is why it has an entire specialism around it.

Common questions

Where to go next

• Financing a block of flats, insuring one, the freeholder's duties and selling one: the four owner's guides on this site.
• All guides, including the owner-side reading on valuation, licensing and the title split process.
• Finance for blocks, if you are buying or refinancing.
• Learn title splitting, if the two-values gap is what you want to go after.
• Sell a block or portfolio, if you want out rather than in.