Property Matters

In this section of our Hub you will find 'our property specific thoughts & considerations'. The information in this section is NOT mortgage advice, but covers a range of property related issues that we regularly discuss with clients. 

We appreciate there is a lot to consider and think about, so feel free to call us for a no pressure conversation about your options and what considerations will be relevant to you, or if we are here, why not Live chat us......

Initial Considerations

Many buy to let lenders take a bit more care when assessing the suitability of a property for buy to let / investment purposes.  This leads to slightly different property criteria and increased likliehood of a physical valuation inspection.  We have detailed below some of the main property considerations that have been raised by investors, and things for you to look out for.

Titles & Restrictions

Title deeds are paper documents showing the chain of ownership for land and property. They can include:

  • conveyances

  • contracts for sale

  • wills

  • mortgages

  • leases

In this section we do not attempt to get into the nitty gritty of conveyancing and Law, however we do want to share with you, important considerations from a lending perspective which are detailed below:

Several different kinds of properties can have TITLE matters than may concern some lenders. 

 

The main tittle matters to ensure that your mortgage broker is aware of are:

  • Multiple dwellings on one title

  • Agricultural restrictions/ties

  • Overage Clauses

  • Sections 157 / 106 restrictions

  • Occupancy restrictions

 

Many lenders will have concerns about the above-mentioned title issues for several reasons, however there are often lenders who will be agreeable to the restrictions.  The important thing is to find out as soon as possible if there are any restrictions/clauses that you should be aware of from the seller and make sure that, if you are happy to proceed, that your broker is fully informed of these restrictions to ensure they can approach the right lenders.  

Often, we find that title issues are not discovered until the purchase is in the conveyancing stage which is often after valuation and application fees have been paid and the lender has formally offered the mortgage, however the mortgage offers are always subject to the properties title being acceptable to the lender (among other things).

Your Balanced Broker will be able to discuss the lenders concerns regarding these types of restrictions in more detail if required.

Lettability Considerations

When most lenders look to assess a potential property as suitable security for their buy to let loan, they look closely at the letability of the property. One of the stipulations for many lenders is that the property is ‘immediately lettable’ with very few lenders prepared to consider a standard buy to let mortgage against a property which is not ‘immediately lettable.’ Main things lenders look at are:

EPC Rating – The current minimum is an E rating or a valid exemption however there is government proposals to increase this to a C in the future. We recommend you research this carefully.

Legal Matters – Please see our Buy to Let Basics Page for further information on the EPC Requirements and other legal requirements.  Not all of these need to be in place before purchasing and your Balanced adviser will be able to guide you on what lenders will expect based on your own personal circumstances and target property.

Condition – The property (for most lenders) needs to be move in ready.  This does NOT mean that you cannot go in once you have purchased the property and give it a cosmetic freshen up, lenders are looking ideally for it to be ‘acceptable’ as it stands at the point of application.

Damp – Damp can cause concern for lenders as they do not want to take a property as security for a large loan which is likely to deteriorate over time without proper remedial works. In addition, damp is a common problem for tenants, and it is unlikely a property would be considered ‘immediately lettable’ by the valuer if there is evidence of a damp issue.

Licencing – Lenders will require that appropriate licences where required are in place, or that it is reasonable to expect they will be put into place immediately on completion of the loan

Planning – Lenders will also require that their conveyancers ensure that all required planning consents are in place to ensure the property is used in an appropriate and lawful way

Construction Types

Construction type is another important factor for lenders when considering if a proposed buy to let property is suitable security for their loan.  We have listed below the main construction types which can be declined by some lenders:

  • Single skin external walls

  • Concrete Block construction

  • Prefabricated concrete construction

  • Timber framed properties

  • Steel framed properties

  • Thatched roofs

  • Listed buildings

  • Defective construction

Many lenders have concerns about resale ability in the event of repossession of ‘non-standard’ construction properties. Most lenders ask for the construction type at application stage to avoid decline decisions post valuation.

 

As we say throughout the hub, there are often lenders who will consider lending, but it is important your broker understands the construction type as early as possible to avoid approaching a lender who will not consider a specific property type.

At Balanced we do have access to lenders who will consider non-standard construction properties so its worth speaking to us before you make a final decision on purchasing a property of non-standard construction.

Property Types

At Balanced we have access to all sorts of lenders who lend on all sorts of property types, however there are some main considerations when deciding what type of property you want to invest in.

New Builds – Some lenders can reduce or restrict the maximum loan to value available to new build or newly converted properties, although this is more often for flats than houses.

Ex Local Authority properties – As above, more often lenders are concerned with Flats rather than houses with some having specific criteria regarding the %age privately owned in the block and other specific criteria points, however there are some lenders who simply do not lend on ex local authority properties.

Flats – There will be a much larger section on flats coming to this website soon as there is so much to consider, however the main points to look for when investing in a flat are:

  • Is the remaining lease long enough?

  • Are there onerous lease terms (This is a huge subject so please feel free to call us to discuss)?

  • Does the lease permit the property to be let?

  • Does the lease permit pets?

  • Are there suitable parking facilities?

  • Consider the costs of the lease, Service & maintenance charges and the ground rent costs.

 

If you are purchasing a flat as a buy to let investment we will ask you lots of questions surrounding the lease and its terms so we can try to avoid problems during the conveyancing stage.  Lenders will ask the soliciotr to ensure their interests are protected and they will be required to ensure the lease terms are acceptable to the lender. Although it may not be easy to find out everything, we recommend you ask the seller/agent as much as possible so that you can make an informed choice as to whether the property will be an economically viable investment.

General Lender Considerations

Here are some general lender specific considerations.  As with every point refered to in this section, these considerations do not apply to all lenders, but it can be helpful to be aware of these potential issues.

 

Lender Exposure Limits – Lenders can have internal limits applying to a maximum number of properties in a certain postcode area, or number of flats in a block.  Its wise to be mindful that this is often not discovered until after an application is made.

Owned by seller for less than 6 months – This issue can surprise some purchasers, but lenders apply extra caution where the seller has owned a property for less than 6 months and these checks stem from an obligation to ensure that there is no potential fraud or other such issues with the transaction.

Location

Location, Location as they say…..  Location matters to lenders, and it should to you as an investor too. Here we cover 5 Location themed matters which can, when presented to the wrong lender cause problems for a mortgage application.

 

Article 4 areas – Article 4 directions are made by local planning authorities, and it restricts the scope of permitted development rights.  This is often a concern for HMO / shared accommodation investors although Article 4 directives can also affect other types of investors too. We come across this as an issue most commonly with HMO Landlords. If you are purchasing a property in an article 4 area there are several important factors you will need to consider for your investment.  A valid HMO licence is not the same and is insufficient to confirm the lawful use of the property as an HMO. For further information, contact the team and we will talk you through the main points to consider when looking to purchase in an article 4 Area.

 

Selective licencing areas – Some areas are subject to selective licencing schemes. This is where ALL let properties must be licenced, regardless of their size or use (including single family homes). Licencing is considered by some as an additional expense and some lenders have concerns surrounding the quality of the area given that selective licencing is often introduced to tackle what are considered ‘problem areas.’  If you are considering purchasing in a selective licencing area please speak to your adviser and ensure you are aware of the local authority licencing costs and financial penalties in the event of failure to licence, or late licencing.

 

Above/Near Commercial – This is an issue we see frequently, flats above commercial premises, or properties near to commercial premises like takeaways/pubs/restaurants etc. Where the is a potential for intrusive smells/noise/unsociable hours, this can affect resale value in the event of repossession and as such lenders often either decline or restrict loan to value ratios to ensure their interest are protected. At Balanced we offer a ‘pre app check’ service for properties you are looking to purchase, and we can give you an idea of potential lender issues before you put an offer on the property. If you do wish to proceed to purchasing a property near commercial premises, we have access to lenders who take a practical approach to the property and its surroundings.

 

Property next door – This may seem like a peculiar issue but be mindful of purchasing a property attached in some way to one you already own. Some lenders have concerns that properties will be knocked through or significantly altered and have specific rules regarding such matters.

 

Flood Zones – While most lenders are happy provided you can achieve appropriate buildings insurance, be mindful that the insurance could be more than you bargained for leaving the property a less attractive investment considering insurance costs.

General Property Considerations

Here are some general property specific considerations.  As with every point referred to in this section, these considerations are for general information and different lenders take different views on each matter referred to below.

Japanese Knotweed – Lenders can have serious concerns about Knotweed as this can be a dangerous and invasive plant species which has the potential to cause significant damage to the structure of a property.  We recommend that you ask if there is any knowledge of or history of knotweed in the area/property you wish to purchase.

​​Flying Freehold – Lender generally are happy with a small area of a property to be a flying freehold, but the % of the floor space is important to most lenders so it is worth knowing if there is any flaying freehold and if so, how much.

​Solar Panels – Lenders can be wary of solar panels which are not entirely owned and sold with the property.  Be careful to check if any panels are leased and if so, what conditions are attached to that lease. Your broker will need to pass this information to the lender.

Acreage – Lenders have varying maximum acreages with properties.  Properties with large areas of land can cause lenders concerns that some may be used for semi-commercial or commercial purposes.  If there is more than a couple of acres of land, we recommend that you discuss this with your broker, again to ensure that the right lender is approached.

Conclusion

There is lots to consider when deciding what property is the right investment for you.  Whilst we have tried to give a comprehensive list of various considerations to help you in making your decision, we do appreciate that there are lots of things that lenders consider and that lenders vary significantly from one to the next on what is or is not acceptable to them when deciding if the property will be suitable.   Balanced Brokers have a wealth of experience with different property types and different lenders, and we can help you navigate the lenders individualities and assist in approaching the right lender, for the right property.

Balanced Brokers are on hand to help, guide and answer questions without any pressure or heavy sales tactics so you can be confident that you will not regret calling us.