Understanding Relief for Transfers Involving Multiple Dwellings: Example 3 Explained

Multiple Dwellings Relief and Freehold Reversions with a Long Headlease

For SDLT, buying the freehold reversion of a block of flats does not always qualify for multiple dwellings relief. If the whole block is already subject to a long headlease of more than 21 years, HMRC’s view is that the freehold purchase is not a relevant transaction for the dwellings, even though the building is residential. The result can differ if the transaction is a transfer of the long headlease instead.

• SDLT relief depends on the legal interest being bought, not just the fact that the building contains dwellings.
• Where a 999-year headlease already covers the whole block, a later purchase of the freehold reversion is treated as too remote from the flats for multiple dwellings relief.
• In HMRC’s example, no relief is available on the freehold reversion of a block of 20 flats because all flats are subject to the 999-year headlease.
• If the 999-year headlease itself were transferred, the transaction could be relevant for flats only subject to leases of 21 years or less.
• Different flats in the same block may be treated differently depending on whether they are already subject to underleases of more than 21 years.
• When reviewing a block with layered titles, check exactly what is being transferred and whether any intervening lease over 21 years takes the dwellings out of scope.

Scroll down for the full analysis.

Multiple dwellings relief and the purchase of a freehold reversion subject to a long headlease

This page explains a narrow but important point about multiple dwellings relief for SDLT. It deals with a situation where someone buys the freehold reversion of a block of flats, but the whole block is already subject to a very long headlease. The practical outcome is that the purchase of the freehold may not count as a qualifying transaction for the dwellings at all, even though the property is residential in substance.

What this rule is about

Multiple dwellings relief is concerned with transactions involving dwellings. But not every acquisition connected with a block of flats is treated as a transaction in respect of those dwellings for the purposes of the relief.

Where property interests are layered, for example a freehold owned by one person and a long lease held by another, the question is not simply whether the building contains dwellings. The question is which interest is being transferred, and whether that transferred interest is a relevant interest in the dwellings for the relief.

This matters because buying the freehold reversion to a block can look, commercially, like buying a residential investment. But SDLT reliefs depend on the legal interest acquired, not just the economic background.

What the official source says

The official example considers the purchase of the freehold reversion of a block of 20 flats. A 999-year headlease over the whole block has already been granted to a company controlled by the tenants. Ten of the flats are then let on 99-year leases, and the other ten are let on leases of 21 years or less.

HMRC’s conclusion is that the purchase of the freehold reversion is not a relevant transaction for the purposes of multiple dwellings relief. The reason given is that all of the dwellings are subject to the 999-year headlease, which is a lease of more than 21 years. On that basis, no relief is available on the transfer of the freehold reversion.

The example then adds an important contrast. If the transaction had instead been a transfer of the 999-year headlease, that would have been a relevant transaction in respect of the ten flats that were subject only to leases of 21 years or less.

What this means in practice

The key point is that the existence of the 999-year headlease sits between the freehold and the individual flats. Because that headlease is itself a lease of more than 21 years over the whole block, the freehold reversion is too remote from the dwellings to qualify in the way needed for the relief.

So, even though the building contains 20 flats, and even though some of those flats are occupied under short leases, the buyer of the freehold reversion does not get multiple dwellings relief on this example.

By contrast, the holder of the 999-year headlease is in a different position. If that headlease were transferred, the transaction could be relevant for the flats that are not already subject to another lease exceeding 21 years. In the example, that means the ten flats let on leases of 21 years or less could potentially fall within the relief analysis, while the ten flats already let on 99-year leases would not.

This shows that the relief depends heavily on the legal structure of the interests in the property. Two transactions involving the same block can produce different SDLT outcomes depending on whether the buyer acquires the freehold reversion or the long headlease.

How to analyse it

When looking at a block of flats with layered interests, it helps to work through these questions:

• What exactly is being transferred: the freehold, a headlease, or an individual lease?
• Is there already a lease of more than 21 years affecting the dwellings?
• Does that long lease sit between the transferred interest and the dwellings?
• For each flat, is the acquired interest the relevant one for multiple dwellings relief, or has the dwelling already effectively dropped out of scope because of an intervening long lease?
• Are different flats in different positions because some are subject to long underleases and some are not?

The 21-year threshold is central in this example. HMRC treats the 999-year headlease as preventing the freehold reversion purchase from being a relevant transaction for any of the dwellings. But if the transferred interest is the headlease itself, the analysis moves down one level and the position of the individual underleases becomes important.

Example

A landlord owns the freehold of a block of 20 flats. Years ago, the landlord granted a 999-year lease of the whole building to a residents’ company. The residents’ company then granted 99-year leases of 10 flats and shorter occupational leases of the other 10.

If an investor now buys the freehold reversion from the landlord, HMRC’s example says that purchase does not qualify for multiple dwellings relief. All 20 flats are already subject to the 999-year headlease, so the freehold reversion transfer is not a relevant transaction for the relief.

If instead the residents’ company sold the 999-year headlease, the position would be different. On HMRC’s example, that transfer would be relevant in relation to the 10 flats that are only subject to leases of 21 years or less, but not the 10 flats already let on 99-year leases.

Why this can be difficult in practice

The difficulty is that a block of flats often has a complicated title structure. A buyer may think they are acquiring a residential property interest in 20 dwellings, but SDLT looks closely at which estate or interest is actually being acquired.

Another practical difficulty is that the answer may vary flat by flat. In the example, the same headlease can be relevant for some flats but not others, depending on whether there is a further lease exceeding 21 years.

This is also an area where readers should be careful not to collapse the legal layers into one commercial picture. A freehold reversion, a 999-year headlease, and 99-year underleases may all relate to the same building, but they are not treated the same way for the relief.

The official material here is an example from HMRC’s manual. It is useful for understanding HMRC’s approach, but the underlying legal analysis still depends on the statutory rules on what counts as a relevant transaction and the precise property interests involved.

Key takeaways

• Buying the freehold reversion of a block does not automatically mean the transaction qualifies for multiple dwellings relief.
• If all the dwellings are already subject to a headlease of more than 21 years, HMRC’s view is that the freehold reversion transfer is not a relevant transaction for the relief.
• Where a long headlease is transferred instead, the relief analysis may still apply to flats that are only subject to leases of 21 years or less.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Relief for Transfers Involving Multiple Dwellings: Example 3 Explained

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