Property Purchase Problem?

by Readers Question

11:06 AM, 23rd February 2018
About 8 months ago

Property Purchase Problem?

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Property Purchase Problem?

I have a pressing problem with the planned purchase of a BTL. I wonder if you could help?

In summary, I’m looking to buy a house through my BTL Ltd Company (set up following section 24.). The house is a good investment as it is split into 5 self-contained flats and in a row of other terraces mostly subdivided in the same way. The combined rent covers the mortgage 4 times over. The units are in reasonable condition albeit they are not luxury apartments. The vendor has 2 others on the same street and says they all rent well but he wants to sell 1 to pay off the mortgages on the other 2 and spend his retirement with 2 of these units mortgage free. I’ve spoken directly to him a number of times. He seems like a very reasonable chap and all of us live very locally and so is the purchase property.

So on face value this all sounds great!

The problem is that when we have applied for funding, initially we were told that these 5 units meant that we should be considered as ‘portfolio landlords. This meant that we have been required to apply to specialist lenders.

So I invested a few hours in the required business plan and other associated paperwork and paid fee and submitted application. The valuation was arranged and the vendor spoke to the valuer on the day who said that it was ‘fine’ and much better than a lot of the dross he gets to value. Everything seemed to be ticking along nicely until we got a flat rejection from the bank. Their reason was that the surveyor had reported the property required a ‘multi-trade refurbishment’ and that as all the units were tenanted they thought this would not be possible with the tenancies in place. The property is therefore not considered suitable security for the lender.

Both the vendor and ourselves are gobsmacked. The property is very habitable and the building is sound. We’re buying for £280k and the agent reckons if converted back to a single house it’d go for £350k and sell well. It would be easy to do this conversion and the £70k would probably cover it. the rent easily covers the mortgage. It’s a good buy all round.
Nevertheless the vendor and ourselves are in problem solving mode and so we have asked to see the valuation report. The lender won’t release it. The broker won’t pursue them any further. I got fed up and have called them directly. They say in summary that it needs full refurb and so it’s a flat NO. It won’t be considered again without a full refurb but won’t define what that means other than to say they look for quality property that is in good lettable condition and meets their 3 tests of: sustainability, suitability, saleability.

We can’t buy it on bridging finance without certainty that we can then get a mortgage. Also this would affect what we could pay for it too.

I’m thinking of the following actions:
1. passing all this on to the broker and asking her to look for other lenders again – not sure if all lender will take the same view
2. speaking with the vendor to see what they say
3. go back and view it and draw up a schedule of works that we can agree with the vendor would comprise a full refurb
4. perhaps have a meeting with the vendor and agent? to see if we can put our heads together and find a solution?

Does anyone else have any ideas?

Andy



Comments

Neil Patterson

11:10 AM, 23rd February 2018
About 8 months ago

Hi Andy,

It sounds to me like you are trying to fit a square peg in a round whole and with the wrong lender. Especially as your broker has given up.

There are many more niche commercial lenders out there and some to Bridge to BTL products that may be suitable such as Shawbrook Bank. They are generally not available directly by borrowers though so if you need a new Broker let me know and I will introduce you to ours >> npatterson@property118.com

Kate Mellor

13:31 PM, 23rd February 2018
About 8 months ago

I'd try Paragon if I were you. They are one of a handful who will lend on a block like this on a single BTL and are good to deal with. Shawbrook are an option, but they are a pain to deal with. We have two mortgages with them, a semi-commercial and a commercial and they made us instruct our own independent solicitor and made us also pay for their solicitor to represent their side. Such an unnecessary duplication of effort and expense! I'm not saying DON'T use them, you need to go with the one who'll do it for you, but I'd definitely try Paragon first. Both Paragon and Shawbrook Bank provided us with copies of the valuation reports which is good to know in advance. It's possible Shawbrook would be less arduous if it were a residential BTL rather than commercial, I can't say, but that was my experience.

Mark Alexander

14:21 PM, 23rd February 2018
About 8 months ago

Seems to me that it’s the values who has caused the problems. I’d insist on speaking to him and seeing his report. If he said no I would complain to RICS about him.

I would also make a formal complaint to the lender demanding a copy of the valuation report and threatening to go to the Financial Ombudsman if one was not provided. I would also submit a Subject Data Access Request to the lender with my £10. I might get a copy of the valuation report or I might not, but I’d have more than £10 worth of satisfaction of knowing that I’d be making their lives as difficult as they were making mine.

I hope that helps.

blair

14:34 PM, 23rd February 2018
About 8 months ago

have you checked that they building and planning consents with final pass by the Inspectors and planning conditions meet.

If not down the road you could have issues Okay I know Building Act is not enforceable after a year but Councils are getting tougher esp. with this licensing stuff ( selective)

Howard Reuben CeMap CeRER

12:17 PM, 24th February 2018
About 8 months ago

Hi Andy

Assuming it's a single title freehold property, this is not a portfolio issue. A portfolio landlord is deemed to be a BTL investor who has 4 or more "BTL mortgaged properties". Your target property is one property (ie one title at the Land Registry), which just happens to have more than one tenant in situ, but it's still only one mortgaged title / property.

The lender who you previously used may not be appropriate, whereas there are many, many other lenders out there who might be able to help you.

Our Team of specialist BTL mortgage brokers can source the bank who will say yes.

You can contact me and my Team via my member profile above.

Hope that helps.

Paul Tarry

13:32 PM, 24th February 2018
About 8 months ago

Its standard practice with commercial purchases and leases that the buyer/tenant pays both sides of the solicitors fees, I have done this many times


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