One house, many homes

THE QUESTION

I have seen several large houses for sale in auctions that have been split into self-contained flats; it seems quite common.

The house is on one title the agents describe it as a ‘large house currently being used as flats’.  But there doesn’t seem to be any planning permission for use in this way or building regs for extra kitchens and bathrooms.

I don’t want to buy at auction and then find out it is not mortgageable afterwards. What is your advice?

THE ANSWER

We’ve had plenty of experience of this!

First you need to understand the problem and then apply the solution ... and there is a solution.

The telling phrase often used by agents and auctioneers is 'currently being used as flats' - they tend to use this when planning permission doesn’t exist.  You don’t have to wait until after the auction to find out it isn’t mortgageable.

It is easy to verify whether planning permission exists or not.  Check the planning portal of the local council’s website. I f you cannot find it there it is possible it pre-dates that, so ask the Planning Dept.  If they cannot find it, it was never given. However, it is reversible and therein lays your opportunity.

So, you have an illegal conversion, regardless of when it was converted.  Mortgage lenders do not lend on illegal conversions and it will come out that it is during the underwriting process.  This limits buyers to those who don’t need a mortgage and these fall into two groups.

• Cash buyers (whether that’s your cash or someone else's)
• People who understand how to use bridging finance effectively

The solution to the problem of a lack of planning permission is what is known as a Certificate of Lawfulness i.e. retrospective planning approval.  Once purchased you can submit an application for the planners to approve the conversion and thus legitimise it.

You will need to evidence, as part of your application, its continued usage as flats for several years.  As soon as you have CoL, it becomes mortgageable.  It will be prudent, prior to purchase, to establish that the planners have no objection to granting a CoL.

Clearly, being an auction, you will need to work out the maximum you can bid for it still to be profitable.  Bought at the right price, unmortgageable flat conversions can be a great strategy.

You can learn more here:

• Contact Kevin Wright over on his Facebook page.
• Browse the Recycle Your Cash online training library by clicking here.
• Attend an upcoming 1-Day Property Finance Masterclass event - Book in here.