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The lender has a mortgage on the property which is subject to mortgage conditions. In those conditions you're friend will be bound not to carry out major alterations to the works without the consent of the lender. He shouldn't carry out any such works until he has this.
The lender has a charge on the property to the value of the price he paid for it. The forming of two flats on leases (on 99 year leases) or one flat on a lease (for 99 year) and another just remaining on the freehold obviousy affects the valuation of the property because the property will then be subject to those leases.
He needs now to speak with his lender about what they will allow, he will need their consent because the registratino of the flat on a 99 year lease will not occur until the lender's consent is in hand. It's about what the lender's requirements are in terms of what he may grant to others and what interest in the properyt he must retain.
If he is simply to grant a tenancy to his wife and/or another to a private individual then it may simply be a case of getting the lender's consent to the works and remortgaging to a buy to let mortgage. Lender before works, basically.
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Yes, subject to the consent of the lender.
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